Did wedding bells ring for you in 2014? Congrats! Getting married is a very exciting time for a couple, and although the party is over, filing your taxes allows you to reflect back on this significant year in your lives.
For many same-sex couples that took the leap last year – with tax time comes the opportunity to file jointly. What does this mean for your federal taxes? Should you file married filing jointly or separately? TurboTax is here to answer all of your burning questions, so you can start the New Year in financial married bliss.
1. Know your status
Whether or not you live in a state that recognizes same-sex marriage, as long as you were legally married in a state that recognizes same-sex marriages, you can file married filing jointly on your federal taxes. This was decided when DOMA was overturned in 2013, and the U.S. Treasury Department along with the IRS updated their policy for married couples. Note, this does not apply to couples in a Registered Domestic Partnership of Civil Union. It’s important to understand your status, as it affects which options you have at tax-time.
2. Filing Married Filing Jointly vs. Married Filing Separately
Marriage comes with lots of new options, and taxes are no different! If you’re a married couple, you have legally moved into a new tax filing status. What does this mean? This new status gives you two options: file your federal tax return married filing jointly or file separately. In most cases, married couples choose to file jointly. This situation typically offers better tax benefits, as joint returns are taxed at a lower rate. What’s better, there are also tax deductions and credits that now open up to you, which are not available when you file separately, giving you a bigger tax refund.
For couples in which both individuals have high-incomes, filing as married filing separately may have better outcomes. In some cases, two high earning taxpayers could pay more in taxes when they file jointly. This is also known as the “marriage penalty” effect. You can put your information in TurboTax or TurboTax Tax Caster and figure out which filing status gives you the biggest tax refund.
3. Make tax-time adjustments
Understanding what tax forms you need to file this year will help make tax time a breeze. To reflect your new status, fill out a new W-4 with your employer. This will adjust your withholding status and move you from single to married. TurboTax W-4 calculator can help you make the necessary adjustments to your W-4. Did either of you take a new name during the nuptials? Be sure to report your new name to the Social Security Administration and the IRS so there are not name mismatches when you file your taxes.
4. Take advantage of new deductions & credits
With your new status, be sure to claim all the new tax deductions and credits available to you. The Earned Income Tax Credit (EITC) allows for joint filers to gain a tax credit lowering their tax liability. To get this, you must meet or go below income requirements. Understand that qualifying income fluctuates depending on number of children you have. Personal and dependent exemptions are another great way to save money this tax season. For each one you can claim, you will be reducing your taxable income by $3,950 this year.
Be sure to also look to your wedding expenses for potential deductions. If you paid a ceremony fee to the vendor or a venue fee (if your reception was in a museum, historical place, or state park), you may receive a deduction. And don’t forgot about any donations you made in the process, including leftover food or flowers. Keep a running tally of your charitable giving on ItsDeductible to make it count on your 2014 return.
5. Understand your health care coverage under the Affordable Care Act (ACA)
If you receive health coverage through an employer or private insurance, you will be eligible for the same spousal offerings as opposite-sex couples. Your new policy is effective for 2015, so be sure to check with your employer or insurance company on how your plan is changing. If you are still shopping around for the right health insurance for you, understand that you have all the same health insurance benefits as opposite-sex couples. Learn what coverage you need to comply with the Affordable Care Act, and take advantage of new spousal offerings.
Here’s to a blissful 2015, and even bigger life moments to celebrate!