Getting married is an exciting milestone, but it also comes with important tax considerations. For business owners, understanding how marriage affects your taxes can save you time, money, and stress down the road. Here are the key tax tips for newlyweds, with a focus on how these changes may impact your business.
1. Update Your Name and Address
If either you or your spouse changes their name after marriage, it’s crucial to update your information with the Social Security Administration (SSA). You’ll need to file Form SS-5 to get a new Social Security card with your updated name. Failure to do so could lead to mismatches when filing taxes, potentially delaying your tax return.
Also, make sure to update your address with the IRS using Form 8822, especially if you move after the wedding. This will ensure that all important IRS mail, including any notices or refund checks, reaches your new address without delay.
2. Notify Your Employer and Financial Institutions
It’s equally important to notify your employer of any name or address changes. This ensures that your W2 forms are accurate at the end of the year, avoiding any potential filing issues. Similarly, financial institutions and retirement accounts should be updated to reflect any changes so that your 1099 forms and other important tax documents are sent to the right address.
3. Choose the Right Filing Status
Your tax filing status changes when you get married, and the decision between Married Filing Jointly and Married Filing Separately can have a big impact on your tax liability.
- Married Filing Jointly is typically the most beneficial for couples because it allows for more deductions and credits, such as the Earned Income Tax Credit, Child and Dependent Care Credit, and education credits.
- Married Filing Separately is less common but may be more advantageous in situations where one spouse has significant deductions, messy records, or is not reporting all income. It also might help if one spouse has defaulted on federal student loans or other government debts, as it can protect the other spouse’s refund from being seized.
- As a business owner, you’ll need to consider how your combined income could push you into a higher tax bracket if you file jointly. Consult a tax professional to determine the best filing status based on your unique circumstances.
4. Check Your Withholding
After getting married, your combined income may put you into a higher tax bracket. Use the IRS Tax Withholding Estimator to ensure that both you and your spouse are withholding enough from your paychecks to avoid underpayment penalties at tax time. This is especially important for business owners who might have variable income and may not be withholding through payroll.
Additionally, if you or your spouse have income from a small business, you may need to make adjustments to quarterly estimated tax payments to reflect your new financial situation.
5. Health Insurance and Tax Credits
If either spouse is receiving advance payments of the Premium Tax Credit through the Health Insurance Marketplace, report any changes in your household or income. Changes in marital status, income, or family size could impact the amount of tax credit you’re eligible for, and failing to report these changes could result in owing money at tax time.
6. Coordinate Retirement Contributions
As a newlywed business owner, you and your spouse now have more flexibility when it comes to retirement contributions. For example, if one spouse is not working, they can contribute to a Spousal IRA, giving you both opportunities to save for retirement and reduce your taxable income.
Additional Tax Planning Considerations for Business Owners
Beyond the basic tax implications of marriage, business owners should keep a few additional strategies in mind:
- Business Deductions: Newly married couples who both own businesses may have more opportunities for deductions, especially if both spouses contribute to each other’s businesses. For example, one spouse may be able to hire the other and take advantage of certain payroll and benefit deductions.
- Gift Tax Exclusion: Married couples have double the gift tax exclusion, meaning you can gift up to $34,000 annually to someone without triggering gift tax, which can be a useful strategy for business succession planning.
- Estate Planning: Marriage may prompt a re-evaluation of your estate plan, especially if your business is a significant part of your net worth. Married couples benefit from the unlimited marital deduction, which allows you to transfer unlimited amounts to your spouse free of federal estate and gift taxes.
Conclusion
Marriage brings exciting changes, but it also comes with new tax responsibilities. As a business owner, it’s essential to stay proactive and informed about how these changes can affect your taxes. By updating your personal information, choosing the right filing status, and leveraging tax planning strategies, you can navigate your newlywed tax situation with ease. Be sure to consult a tax professional to tailor these tips to your unique business and financial situation.
