Valentine's Day tax tips & tidbits
Sunday, February 14, 2010
Love and taxes. Yes, they do go together.
First, all you married folks. Congratulations on sticking with those vows. I know you didn't invite Uncle Sam to your wedding, but he was there in spirit.
When it comes to taxes, your marital status for a tax year is determined by your relationship status on Dec. 31 of that year.
If you were married 364 days but the divorce was final on the last day of the year, then when you file that year's tax return you are single.
Conversely, if you didn't get married until Dec. 31, then those 364 single days don't matter to the IRS. You were married in the tax man's eyes for the full year.
So all you couples considering marriage, keep that in mind when planning your big day.
Yes, romance matters, but it never hurts to be pragmatic. The hubby and I pushed our wedding 28 anniversaries ago (yes I was a child bride!) into a new year to take advantage of what at that time was a new tax break for dual-earning married couples.
Filing status options: Once you've tied the knot, you then get to decide whether me you want to, or should, send in your returns jointly or file separate 1040s.
Even when you have a great marriage, sometimes it pays to file separately.
Your shared home: The tax laws provide a very nice Valentine for married homeowners when they sell. We get a tax break twice as large as that available to single home sellers.
As long as the house is our principal residence for at least two of the five years before selling, we can exclude from tax up to $500,000 in sale profits.
What about buying? Newlyweds who moved into their first home last year or will settle on one by June 30 (as long as they sign the purchase contract by April 30) might be able to get an $8,000 credit.
Couples who've lived in a home for five of the eight years before they sell could qualify for a $6,500 credit on their next residential purchase.
The important thing here is to note that each spouse's home buying history is taken into account. If you qualify for either the first- or long-time homebuyer credit, but your spouse doesn't, then y'all, as a couple, can't claim the credit. The law considers the ownership history of both spouses.
Other tax issues for couples: What about the marriage penalty? Sometimes there's a marriage bonus.
Then there are kid tax considerations when love and marriage lead to full baby carriages.
And don't forget about estate taxes (if they're ever reinstated) and the special considerations that surviving spouses got in these instances.
Yep, taxes are an integral part of your life as a couple. And while the IRS doesn't expect a Valentine's Day card, when you do enjoy a tax break thanks to your marital status, you might want to give a nod to the tax code.
You can read more on tax and marriage issues in How marriage impacts your taxes, an excerpt from my book, The Truth About Paying Fewer Taxes.
And since I'm such a romantic tax geek, there's more in these related posts:
- Hearts and flowers and taxes
- Tax to-do's after saying 'I do'
- Wedded tax bliss
- Madoffs, marriage and tax filing
- Love, luck, money and Valentines
Vintage Valentine's Day card image courtesy VintageHolidayCrafts.com
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Haha. The article looks very romantic but the content is serious and talks about taxes for married and to the divorced one. Tax is on the air.
Posted by: tax services philippines | Tuesday, February 23, 2010 at 11:43 PM