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Tips for Recently Married or Divorced Taxpayers
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Getting married or divorced can have a significant impact on your tax situation. As newlyweds or divorcees, it’s important to understand how these life changes can affect your taxes and take advantage of any tax planning opportunities that may arise.
- Update your filing status: When you get married or divorced, your filing status changes. If you were married before December 31 of the tax year, you can choose to file as married filing jointly or married filing separately. Filing jointly usually results in a lower tax bill, but filing separately may be beneficial if one spouse has a high income or significant deductions. If you got divorced during the tax year, your filing status will be single or head of household.
- Update your withholding: After getting married or divorced, make sure to update your withholding allowances on Form W-4 with your employer. Adjusting your withholding can prevent you from owing a large tax bill or receiving a large refund at the end of the year.
- Consider the impact on deductions and credits: Marriage or divorce can affect your eligibility for certain deductions and credits. For example, if you are divorced and have children, you may be eligible for the child tax credit or the earned income tax credit. If you got married, you may no longer be able to claim some deductions you were eligible for as a single taxpayer.
- Determine who will claim dependents: If you have children, decide who will claim them as dependents on their tax return. Generally, the custodial parent claims the children as dependents, but this can be negotiated between the parents. Keep in mind that only one parent can claim a child as a dependent for tax purposes.
- Review your retirement accounts: If you are getting divorced, make sure to divide any retirement accounts fairly according to your divorce agreement. You may need to obtain a Qualified Domestic Relations Order (QDRO) to divide retirement accounts without tax consequences. If you are getting married, consider updating your beneficiary designations on retirement accounts to reflect your new marital status.
- Update your name with the Social Security Administration: If you change your name due to marriage or divorce, make sure to update your name with the Social Security Administration (SSA). This is important for ensuring that the name on your tax return matches the name on file with the SSA. A name mismatch can cause delays in processing your tax return and may result in issues with tax refunds or credits.
- Keep accurate records: When going through a name change or Social Security number change, it’s important to keep accurate records of the process. Retain copies of any documents related to the name change, such as marriage certificates or divorce decrees. This will help you provide proof of the name change if needed during tax filing or other financial transactions.
- Consult with a tax professional: If you are unsure about how marriage or divorce will impact your taxes, it’s a good idea to consult with a tax professional. They can help you navigate the tax implications of your new marital status and create a tax plan that works for you.
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