Getting married is a huge step for everyone. Not only are you combining your two lives legally, which means that you are now sharing just about everything, you are also combining your financial lives. Even if you maintain separate checking accounts (some argue this is a bad idea, but it has helped save countless marriages by eliminating fights over money), your financial lives will be severely intertwined and changed forever. If you are planning to get married soon, or looking toward the future as to what marriage will bring, your accountant in Billings, Montana helps you be aware of what to expect.
Dual Incomes After Marriage
There is a term you may have heard. And most likely you have heard it used inappropriately. That term is dink, which stands for Dual Income No Kids. Even if you are young, fresh out of college, and not making a lot of money, two incomes is better than one. As a married couple your expenses don’t increase that much, but the money coming in doubles. Before kids enter the picture, now is the time to really get things on track financially (because after kids come then you are in a whole new financial category).
With two incomes you will want to make sure that your emergency fund is sufficient. This means having enough to cover a few months of living expenses if you were to suddenly find yourself unemployed. It also means having a bit extra so when, or if, you decide to have children you have enough to pay for their hospital bills when they’re born.
Two incomes means really plugging away at your retirement funds as well. When you are young, and time is on your side, is when you need to stuff as much money into your IRA’s as possible. A few years now are worth a whole lot more than a lot of years later.
But two incomes will also mean that you are pushed into a new tax bracket.
Married Couple Taxes
Suppose you were married on January 1st 2015; your taxes for all of 2015 would be as a married couple. If you were married on May 1st 2015; your taxes for all of 2015 would be as a married couple. If you were married on December 29th 2015; your taxes for all of 2015 would be as a married couple. You get the point, no matter when you were married, for tax purposes you were married the entire year.
For those in a lower tax bracket (that is the 10% or 15% brackets) the incomes are basically double. For instance, as a single person you are taxed 15% on earnings between $9,226 and $37,450. For a married couple filing jointly, you are taxed 15% on earnings between $18,452 and $74,900. However, once you move into the 25% bracket, that is when things start to change a little.
Add into the mix that if you have substantial deductions, but your spouse doesn’t, then it may be better to be married filing separately. If you work, but your spouse doesn’t, then there is always the head of household status. If you have a lot of deductions, then you could push yourself into a lower bracket. The bottom line is that as your income increases, your taxes become more complicated; especially with a spouse and a family. It’s a good time to hire an accountant to do your tax preparation.
We are a full service accounting firm in Billings, MT. We understand that marriage causes a lot of different financial changes, and money can end up causing a divorce. Instead of fighting over money, be prepared for what is to come, and let us handle your taxes so you can eliminate stress from your lives.