Review your Taxes and Withholding

One of the first things you will want to do is adjust your tax withholding on form W-4 (available from your employers) to reflect your new marital status. Two-paycheck couples may need to have more tax withheld to cover the higher taxes due on their combined income. Instead of claiming one withholding allowance, one or both spouses may want to claim zero or even have an additional amount withheld so they don’t fall short of what they owe. Couples with one earner may experience a “tax bonus” as a result of marriage and can withhold less tax than before. This is because they benefit from the higher dollar amounts on tax brackets for married couples versus singles.

It is a good idea to exchange tax returns with your spouse from the past three-to-five years prior to marriage. This will increase understanding of each other’s finances and assist in future tax planning. A good source of information about the financial habits of a spouse-to-be is his or her checkbook register.

Consider the “married filing separate” filing status option if one spouse has high deductions (business or medical expenses, for example) that would be severely limited by filing jointly. Generally speaking, married filing separate status does not help married couples save on taxes. There are, however, instances when it does. Note that if a husband and wife file separate tax returns, they must use the same method of claiming deductions. For example, if one spouse itemizes, so must the other.

Consult a tax preparer, if needed, and consider calculating taxes both ways—married filing jointly and married filing separately—if one spouse has particularly high deductions, to see which method produces the lowest tax bill.

© 2005 National Endowment for Financial Education. All rights reserved.