Families and Finances: The Rewards are Great
If you recently got married or are planning a wedding, the last thing on your mind is taxes. However, there are important steps you need to take to avoid stress at tax time.
First, you need to update your tax withholdings, followed by consulting with an accountant regarding your filing status. Couples have the option of filing jointly or separately, and depending upon your income, career and family, one may make more sense than the other.
Things to keep in mind when facing marriage and tax decisions:
- You are considered married for tax purposes on the last day of the year.
- If one spouse earns much more than the other spouse, consider various tax brackets carefully. A general rule of thumb is that the person in the marriage who makes the most money should take the exemptions on his or her W-4. The other person should generally take a single filing status with zero or one allowances.
Helpful hint: A good resource is IRS Publication 919: How do I Adjust My Tax Withholding?
Growing your family is one of the primary pleasures in life and one that requires a careful reassessment of your personal finances. Whether you’re planning for the impending birth of your child, considering adoption or perhaps building a blended family, reviewing and updating your budget and financial plan are essential.
Children also bring a host of tax planning opportunities and concerns, whether it’s saving for their college, shifting certain income to a child’s lower tax bracket, or utilizing the various tax credits that are available. Also, you may have opportunities through an employer that provides a flexible spending account that can be used to pay pre-tax for certain child care related expenses. Some of the many tax planning opportunities include the child tax credit, the additional child tax credit, and hope and lifetime learning credits.
Helpful hint: According to 2008 figures from the United States Department of Agriculture, the estimated annual cost to raise a child is $11,610 to $13,480 for an average-income family (not including college education or the forgone wages and benefits one or both parents might incur while raising a child).
© 2012 WSVMA