Here’s what you need to know about your tax filing status options once you’re married.

Congratulations on your engagement or marriage! No doubt the two of you have discussed where you want to live, whether you’d like to start a family, and where you will spend the holidays. Marriage will mean big changes in your life, including how you file your taxes. Have you talked about that? Here’s what you need to know to make the transition from single to married a smooth one at tax time.

IRS Definition of Married

Marriage changes a lot of things, including your tax status and the amount of taxes you are required to pay.

The IRS is the nation’s tax collection agency. It considers you married for tax purposes for the entire tax year if, as of December 31 of that year, any of the following apply to you:

• You are married and living with your spouse.
• You are living with your common-law spouse in a state where common-law marriages are recognized or in the state where the common-law marriage began.
• You are married and living apart but are not legally separated or divorced under a court decree.

Choosing Your Filing Status

Marriage changes a lot of things in your life, including your tax status. Once you are married, you must choose either the married filing jointly or married filing separately tax filing status. Don’t worry, your filing status with the IRS is not a comment on how well the marriage is going. The status you choose should be based on these criteria:

• Blended Family
  Child tax credits and other dependent credits are applied based on dependent status and living arrangements. Child support payments can also be affected by taxpayer filing status. You may want to weigh your options for each filing status and see which one is better for you. If you share custody of a child with someone not part of your current household, only one of you can claim the child as a dependent.

• Separate Finances
  Because of preexisting debts or premarital assets, a couple may choose to maintain separate finances. Married filing separately will accomplish this goal, although you may miss out on some marital tax benefits.

• Tax Liens
  One legal aspect of marriage is that you become responsible for each other’s debts. When one spouse enters the marriage with tax liens, it could be best to file separately until the debt is cleared up. A joint filing may result in a tax refund surrendered to the IRS to help pay off the debt. If the non-indebted spouse wants to protect their portion of the tax refund, the couple can file an injured spouse allocation with their joint tax return.

• Balanced Income
  When both spouses work and earn about the same amount, combining their salaries into a joint tax return may move them into a higher tax bracket. That could mean owing more taxes. If one spouse earns significantly less, a joint return may pull the higher-earning spouse into a lower tax bracket.

• Unexpected Expenses
  When filing separately, one spouse may be able to lower taxable income by deducting substantial medical expenses or casualty losses like property damage from an unexpected event like a flood, fire, or severe car accident.

• Student Loans
  Payments for student loans are based on income. Filing jointly may increase the size of student loan payments. However, education tax credits may be available to couples who choose to file jointly, which outweigh the benefits of filing separately. If filing jointly, interest on student loans may be tax deductible.

• Homeownership
  If you are selling a home that both of you lived in together as your primary residence for at least two years, you could take advantage of the capital gains tax deduction for married filing jointly. The tax deduction of $500,000 is twice as much as the deduction for married filing separately.

Deciding on your tax filing status is almost as important as deciding to get married. The right decision will protect your financial future. If you have questions about filing status, contact your financial institution. They are there to help you with all your financial decisions.