This week is Valentine’s Day, and almost 10 percent of Americans who get married each year have their wedding proposals on that day. With all the happiness that love can bring, many do not think about how income taxes and personal finances are an important part of our romantic relationships. Here are a few examples:
- The IRS considers a couple to be married for the entire year no matter when the wedding date occurs. Accordingly, couples that break up are considered divorced for the entire year if a divorce decree is issued by December 31st of that year.
- A newly married couple should inform the Social Security Administration of any name change. Failure to do this could delay a tax refund for the first time filing as a married couple.
- An income tax situation could be different based on the filing status. Most couples choose “married filing jointly” because it is simpler and more often results in a lower tax liability. However, there are some circumstances when “married filing separately” is advantageous for certain reasons. Both scenarios should be considered.
- Certain tax benefits increase for married couples. When selling a home the tax free profit from the sale increases up to $500,000, double the amount of a single individual. Also a married couple can currently give a joint gift of $30,000 to another individual without tax consequences.
While income taxes are not likely to change a couple’s decision to be together, it is good to know how marriage will affect one’s income tax situation before tying the knot.