How Tying the Knot Can Affect Your Finances

June is the month for weddings, but in the months before you should be figuring out how that step might cost you when you file taxes next year. Otherwise, you may end up looking for a cash loan when tax time comes due next year because you owe thousands. How is that possible? When two people marry their joint income can catapult each of them into a new tax bracket that can cause them to owe more than their present withholdings. It’s a good idea when you’ve decided to tie the knot to take a look at the financial implications of that decision from a tax point of view.

Calculate Your Correct Deductions

Couples unwittingly put themselves at a lower tax withholding when they marry, instead of calculating the extra they might owe. If both people make similar incomes, odds are they will be pushed into a higher tax bracket. However, the opposite can also happen if a high earner marries a low earner and they now have extra personal deductions, too. They might actually be withholding too much, then. Either way, you need to review your taxes to find out what you think you might owe at the end of the year to take action early and avoid a large tax bill.

Increase Withholdings

You can pitch in new tax money by increasing withholdings over the course of the year, even before you get married, if you know that by next year you will owe more. This is a relatively pain-free way to make sure you don’t get hit with too high a tax bill. Also, you can buy a house to get extra deductions or funnel monies to tax-free areas, like a retirement account to lower your income and avoid taxes. Check with a tax advisor for all the strategies you can use to help you manage the potential new tax liabilities you incur when two high wage earners marry.