Tax tips for recently married couples and first-time parents
NEW YORK (AP) — Taxes may not be the first thing on your mind when you celebrate a joyous occasion like a marriage or a new baby. But once you return from your honeymoon or while your newborn is napping, you'll need to spend some time thinking about them.
Keeping your documents organized, updating your withholding and knowing which tax credits you're eligible for are some crucial steps as couples and parents navigate tax season, said Henry Grzes, lead manager of tax practice & ethics for the American Institute of CPAs.
The deadline to file your 2024 taxes is Tuesday. If you run out of time, you can file for an extension until Oct. 15.
Here are some expert recommendations if you are filing taxes as a newlywed or new parent.
Keep things organized
Keeping your tax documents organized is a great practice regardless of your filing year. Having your tax documents in a folder on your personal computer, even if it's pictures of the documents, can help you have everything in the same place, said Tyler Horn, a certified financial planner and head of planning at Origin, a financial planning app.
'Just take a picture with your phone, send it and keep it in that secure folder on your computer. That way you have everything together,' Horn said.
It's also good to keep your records for the future. The IRS recommends that you keep your documents for at least three years and up to seven depending on your situation.
Update your last name if you changed it
If you changed your last name, you will need to make sure your government documents reflect this. Your tax return must match your Social Security number so, if you choose to change your name, you'll need to make a change with the Social Security Administration.
Oftentimes, people forget to make this change ahead of time, which leads them to make mistakes on their tax returns.
'That's something that people don't necessarily think about and when they do think about it sometimes it's it's too late,' Grzes said.
You can find out more about how to change your name on the Social Security Administration's website.
Choose whether to file jointly or separately
One of the biggest changes, for tax purposes, when you get married is whether you choose to file your taxes jointly or separately, Horn said.
To make this decision, each couple should take a look at their specific situation. In most cases, filing jointly might make the most sense but it's not always that case, Horn said. One of the benefits of filing jointly is that it gives you access to new tax credits and deductions.
It's important to know that if a couple is married as of Dec. 31, the law indicates that the couple was married for the entire year, Grzes said. So, if you got married in the summer, in the eyes of the IRS you have been married the full year.
You can read more about each filing status on the IRS website.
Update your W-4 form
If you're planning to file taxes jointly with your spouse, you must update your W-4 form with your employer. Updating your W-4 is meant to reflect your new filing status, from single to married, as well as updating your tax withholding.
Know the available tax credits and deductions
Knowing what tax credits and deductions you qualify for is very important when filing your taxes, Horn said. Relevant tax credits for married couples include the Earned Income, American Opportunity and Lifetime Learning tax credits.
When it comes to deductions, you can either opt for a standard deduction or itemize. Itemizing generally only makes sense if your itemized deductions add up to more than the current standard deduction of $29,200 for a married couple.
In some cases, a person that qualifies for the Earned Income Credit as a single filer will no longer qualify if they file jointly with their spouse, Grzes said. To avoid surprises when you're filing your taxes, Grzes recommends that you work with a tax professional ahead of time.
Obtain a social security number for your child
It's important that you obtain a social security number for your child as soon as you can, Grzes said. The first time you file taxes after you've had your new baby, you will be able to apply for several new tax credits, but you can only do so if you claim them as a dependent.
'If you're going to claim your child as a dependent, you have to have a Social Security number and put that number on the return. Otherwise, the IRS is going to deny you,' Grzes said.
Usually, hospitals let you apply for a Social Security number registration. However, you can also apply online or at your local Social Security office.
Tax credits for parents
To alleviate some of the expenses of having children, the IRS offers several tax credits, including the Child Tax Credit, Childcare Credit and Adoption Credit. Parents also continue to qualify for the Earned Income Credit, which will continue to be based on your earned income and the number of children you have.
'The Earned Income Credit clearly provides a significant refund and by having a child, you could increase the amount of income that you could earn and still qualify for that credit,' Grzes said.
Other tax benefits
Parents can benefit from opening tax-free accounts such as a flexible spending account or a 529 account.
A flexible spending account (FSA), allows you to set aside pre-tax dollars to pay for healthcare and childcare costs, while the 529 account lets you set money aside for education expenses.
'It's worth making sure you are maximizing your tax opportunities,' Grzes said.
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The Associated Press receives support from Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism.
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