Navigate Tax and Mortgage Changes: Expert Tips for Newlywed's or Divorcees
- P. Seely
- Mar 15
- 6 min read
Entering marriage introduces a thrilling new chapter filled with opportunities, but it can also be a little overwhelming. The transition comes with new responsibilities, especially regarding finances. Understanding how tax and mortgage changes affect your financial situation is essential for newlyweds. This guide provides practical tips to help you navigate these changes and build a secure financial future together.
Understanding Your Tax Status
Marriage brings a pivotal shift in your tax status, affecting how you file and the benefits available to you. Upon getting married, couples typically choose between two primary filing statuses: Married Filing Jointly or Married Filing Separately.
Married Filing Jointly is often the more advantageous choice, allowing couples to benefit from a higher standard deduction—$27,700 for 2023—compared to $13,850 if filing separately. This option usually results in a lower combined tax bill and access to credits like the Child Tax Credit, which can be worth up to $2,000 per child.
For qualifying taxpayers who have three or more qualifying children, the tax year 2025 maximum Earned Income Tax Credit amount is $8,046, an increase from $7,830 for tax year 2024. The revenue procedure contains a table providing maximum EITC amount for other categories, income thresholds and phase-outs.
Conversely, Married Filing Separately might be beneficial when one spouse has substantial medical bills that exceed 7.5% of their adjusted gross income, allowing for more significant deductions. If you're unsure which option serves you best, consulting a tax professional can provide clarity tailored to your situation.
The tax year 2025 adjustments described below generally apply to income tax returns to be filed starting tax season 2026. The tax items for tax year 2025 of greatest interest to many taxpayers include the following dollar amounts:
Standard deductions. For single taxpayers and married individuals filing separately for tax year 2025, the standard deduction rises to $15,000 for 2025, an increase of $400 from 2024. For married couples filing jointly, the standard deduction rises to $30,000, an increase of $800 from tax year 2024. For heads of households, the standard deduction will be $22,500 for tax year 2025, an increase of $600 from the amount for tax year 2024.
A taxpayer’s filing status generally depends on their being married or unmarried on the last day of the year – which means that a taxpayer's marital status as of December 31, 2024, determines their tax filing options for all of 2024.
For filing purposes, the IRS generally considers taxpayers as married if they are separated but not legally separated or divorced at the end of the year. Marriage status can determine filing requirements, standard deductions, eligibility for certain credits and tax. For exact qualifications and exceptions on filing statuses, review Publication 504, Divorced or Separated Individuals.
Keep Records Updated
With a new marriage status, it's crucial to update personal information with the IRS and financial institutions. Ensure your name, address, and Social Security numbers are accurate in their records. Having digital copies handy can significantly assist you with getting pre-approved for a new home.
Report any name changes to the Social Security Administration. The name on a person's tax return must match what’s on file at the SSA. If the name doesn't match, it could delay any tax refund. To update information, go to the SSA’s website and look for “Change name with Social Security.” Name changes can also be processed by calling the SSA at 800-772-1213 or by visiting a local SSA office.
It's equally important to inform your employer of any marital status changes, particularly if your benefits are affected because of a divorce. For example, updating your health insurance options could lead to better coverage or lower costs. Keeping your records up-to-date prevents headaches during tax season and makes filing smoother.
Explore Tax Deductions and Credits
Familiarize yourself with valuable tax deductions and credits available to newlyweds. For instance, the Earned Income Tax Credit (EITC) can provide substantial benefits, with eligible couples earning less than $59,187 for the 2023 tax year.
For qualifying taxpayers who have three or more qualifying children, the tax year 2025 maximum Earned Income Tax Credit amount is $8,046, an increase from $7,830 for tax year 2024.
If you've purchased a home, you'll want to check eligibility for the mortgage interest deduction, which allows you to deduct interest paid on your mortgage up to $750,000. New homeowners may also be eligible for one-time deductions related to property taxes or first-time homebuyer credits, depending on your situation.
Reassess Your Financial Goals
This transition is an excellent time to discuss your shared financial aspirations. Take time to outline your goals—whether it's saving for a home, planning for future children, or maximizing retirement contributions.
Establishing clear financial objectives early in your marriage promotes unity and strengthens your partnership. For example, if your goal is to save for a down payment, consider setting a target of 20% of your desired home price and establishing a timeline to reach that goal.
A change in marital status may also affect how much tax should be withheld from the taxpayer’s paycheck. To avoid a surprise at tax time, the taxpayer should use the IRS Tax Withholding Estimator to calculate their withholding and then use that estimate to complete a new Form W-4, Employee’s Withholding Certificate, to give to their employer. Taxpayers can also use Form W-4 to tell an employer not to withhold any federal income tax. To qualify for this exempt status, the taxpayer must have had no tax liability for the previous year and must expect to have no tax liability for the current year.
Consider Mortgage Adjustments
If you or your spouse owns property, it’s wise to review your mortgage status. Lenders assess both income and credit scores, and your combined financial situation can impact your mortgage options significantly.
You might consider refinancing to secure a better interest rate. For instance, if current market rates are 0.5% lower than your existing rate, refinancing could save you thousands over the life of the loan. Carefully evaluating your mortgage can create long-term financial savings.
Notify the U.S. Postal Service, any employers and the IRS of an address change. Taxpayers have several options to notify the IRS of an address change.
Understand Joint Ownership Implications
Marriage can mean sharing financial responsibilities, particularly if you're planning to buy a home together. In joint ownership, both spouses are accountable for mortgage payments and property taxes.
Before committing, discuss how joint ownership aligns with both of your financial situations. For example, if one partner has a lower credit score, it could affect your mortgage rate and overall costs. Be sure you both understand what shared ownership entails and how it impacts your financial health.
Taxpayers who were newly married in 2024 will want to review their filing status options. They can choose to file their federal income taxes jointly or separately each year, so it’s a good idea to figure the tax both ways to find out which makes the most sense. Taxpayers should remember that if a couple is married as of December 31, the law says they're married for the whole year for tax purposes.
Emergency Funds and Insurance Updates
As individuals unite, financial responsibilities will grow. Aim to create an emergency fund that covers three to six months of living expenses. This ensures peace of mind should unexpected costs arise, such as job loss or medical emergencies.
Additionally, revisit your insurance needs, including health, auto, and homeowner’s insurance. If one partner has better insurance—like lower premiums or more comprehensive coverage—consider consolidating policies to enhance protection while saving money.
Communicate Openly About Finances
Open communication about finances is crucial for marriage success. Schedule regular discussions to address budgeting, spending habits, and shared financial goals.
These conversations help both partners understand each other's financial backgrounds, including debts and income. For example, discussing credit card debts can lead to joint payment strategies, aligning your approaches to debt management. This transparency fosters a healthy financial partnership.
Seek Professional Guidance
If managing tax and mortgage changes feels daunting, don’t hesitate to seek professional help. Financial advisors, tax consultants, and mortgage specialists can offer personalized advice based on your specific circumstances.
Investing in expert guidance can prevent costly mistakes and ensure you make informed decisions as you embark on this new financial journey together.
Embrace Your Tax and Mortgage Changes
Transitioning into married life is filled with financial changes and opportunities. By understanding tax implications, reassessing mortgage commitments, and fostering open communication, you can navigate these transitions smoothly.
Collaborate with your partner, stay informed about available resources, and tackle challenges together. Embrace this chance to build strong financial habits that pave the way for a prosperous and fulfilling life as a couple.
コメント