BOSTON (CBS) – June is the month for weddings primarily because the weather is usually so nice. It’s also mid-year and that is a good time to be thinking about tax planning.
Saying “I do” changes your tax situation. Make the effort to review your joint finances and tax situation before the honeymoon! Being married before December 31 means you will file taxes jointly.
If you do not itemize your taxes the standard deduction for a married couple, this is the dollar amount the IRS allows you to deduct from your income before assessing income taxes, is $11,600. That’s twice what you got as a single $5,800.
If you are going to itemize or if one of you did last year try to estimate what your deductions will be this year. Will they be more than the standard deduction? What you will owe in taxes for 2011? Take the time to figure it out for many newlyweds end up owing taxes that first year. You can use a W-4 form to increase or decrease your withholdings for the year. You can get the form from your benefits or HR department at work.
If one of you likes to get a refund and the other does not want Uncle Sam getting the tax money until April 15, there may not be a refund next spring.
Roth IRAs; these get a bit tricky for newlyweds. Right now the income limit to contribute to a Roth IRA for single taxpayers is under $107,000 and phased out once you reach $122,000 and for married couples filing jointly between $169,000 and $179,000. So if you did make a contribution earlier this year be sure you are under the income limit for a married couple. The IRS will allow you to recharacterize the Roth IRA. You can set up a nondeductible IRA.
Student Loans: Currently you can get a deduction for the interest you pay on your school loans, even if you don’t itemize and use the short 1040. A single taxpayer making under $60,000 can get a deduction for up to $2,500. And the deduction is phased out entirely once you reach $75,000
But the $2,500 deduction is good only per tax return. So if you and your new spouse each had been getting the $2,500 deduction you will be limited to $2,500 for both of you combined. Married filing jointly the deduction is phased out for income between $120,000 and $150,000.
And they will make the deduction go away if you try to file separately while married. As always check with your tax preparer for more help or log onto the IRS’s site.
Also be sure any name changes or address changes get to IRS and the Social Security Administration. Use form 8822 to change your address and on it there is a place for a name change as well. The IRS uses Information from Social Security about name changes.
One more thing: Planning Ahead for 2013. The deduction for student loan interest will continue to be available to every person who is legally obligated to repay a student loan through the year 2012. Starting with the year 2013, the deduction will revert to an older law in which student loan interest will be deductible only for the first 60 months of repayment.