Yahoo Finance Podcast: Married? You'll want to do this when you file.
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Listen to Taxes Made Simple by Yahoo Finance and TurboTax to get help in filing your taxes this year.
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Janna Herron: This is Taxes Made Simple by Yahoo Finance and TurboTax. I'm Janna Herron.
So let's talk about if you got married in 2019 even if you got married on December 31st a new year's Eve wedding, you're still considered married for the entire year in the eyes of the IRS. So that means you have to do your taxes a little bit differently this year. What's different? Well, you have two choices. You can file married filing jointly or married filing separately. For the most part, there's really no good reason to file separately if you're married because there won't be a good tech tax benefit for you. You most likely won't want to file married filing separately because that rarely lowers a couples tax bill. So you'll probably want to stay away from that. So that means you're going to file married filing jointly. So what does that mean? It means you only have one tax return to do, but will your taxes actually be lower because you guys are married or will, will they be higher?
There is something called the marriage penalty. While Congress has taken steps to reduce the impact of the so-called marriage penalty. There are times where as a married couple, you might be paying more taxes. This is how generally breaks down if you and your spouse earn roughly the same amount, with pretty good salaries, the odds of getting hit with that marriage penalty where you're paying more in taxes together rather than separately goes up. But if your salaries are very different or say one spouse stays at home and doesn't work, then combining on a joint return, you'll probably actually get a marriage bonus, meaning that you pay less in taxes. Why that is is because some of the higher earners income will be put into a lower tax bracket. Another benefit of being married is if one spouse doesn't work, they can still fund an individual retirement account or IRA. Usually, a single taxpayer who doesn't have paid work can't fund one of these retirement accounts. Why does this help you tax-wise? Because it can actually lower your taxable income for the year.
Another benefit of being married is that you might get a greater charitable contribution deduction. So if you itemize your taxes, this could be helpful in lowering your taxable income. There are some other downsides though, to being married and filing your taxes. For instance, even though you're filing just one tax return, both of you are responsible for the numbers that are in it, so if so, if your spouse is fudging numbers that you're not aware of, the IRS still can come after you as well. Another downside is it might be harder to qualify for the medical expense deduction. That's because to take the deduction, your medical expenses have to exceed 7.5% of your adjusted gross income for 2019 if both spouses work and have a significant salary, that's a larger threshold to meet.
If you're unhappy with how your tax outcome is for 2019 after you combined your incomes and filed married filing jointly, then there are a couple of things that you can do. First, you probably want to check your withholdings. If both spouses are working and earning a salary, it's a lot more difficult to get the precise amount that needs to be taken out of your paycheck each month. Oftentimes couples where both spouses are working under withhold how much tax is taken out of their paychecks each pay period. So to get it right, what you have to do is do a little bit more work when it comes to your withholdings. So when you're filling out your W-4 form, you might want to actually have your tax returns handy so that you can come up with a better withholding strategy. The IRS has an online calculator that can help you figure out how much you should withhold.
The W-4 also has instructions and a special worksheet to help couples who are both working figure out how much taxes should be withheld from their paychecks. If for some reason you decide to file separately as a married couple, one spouse can't itemize while the other spouse takes the standard deduction. Both of them have to do the exact same thing so you can't mix and match after tax season is over. Another thing you can do to help your taxes next year is to go over and coordinate benefits that you and your spouse receive from your employers. For example, one spouse might have a health care flexible spending account where pretax dollars go into an account that pay for medical expenses. If you have children, there's also a dependent care flexible spending account that uses pretax dollars that you can use to repay your daycare expenses, and that's all for newlyweds and their taxes.
This is made simple from Yahoo finance and turbo tax. Please head over to Apple podcasts and leave a five-star rating and review there. Until next time, thanks for listening.
