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Wedding bells bring rejoicing – and financial changes. If you’re marrying for the second time, the changes might seem overwhelming. On the surface, tax and financial planning for a second marriage is similar to that of a first marriage, but there’s more to taxes and marriage the second time around.
For example, no matter what month you hold the ceremony, the IRS will consider you married for the full year. That means employer-provided fringe benefits and taxes withheld from your paychecks could require adjustment. Depending on how much each of you earns and your past financial history, you’ll have to decide what filing status will be most beneficial, and how best to take advantage of tax breaks that may become available.
With a second marriage, you have even more decisions to make, including how you’ll merge your assets. Will you purchase a new home? If both of you already own separate homes, you may each qualify for a $250,000 federal income tax exemption on the profit from the sale, as long as you have lived in the home for at least two of the last five years. If only one of you meets the requirements for the exemption, consider selling the qualifying home and living in the other for a while.
You or your spouse might also have substantial debt or financial obligations. Discuss your financial histories, including alimony or child support still owed and past bankruptcies. Decide who will provide for the college expenses of the children in your now-combined household. Depending on your age, you may want to investigate the effect of the marriage on your social security benefits.
Consider estate issues too, such as updating retirement plans with new beneficiary designations and retitling bank and brokerage accounts. Be sure to discuss how heirs from previous marriages will be provided for, and remember to update your wills.
A second wedding is a joyful event for you, your new spouse, and your extended families. To give your marriage an added advantage, call us before you say, “I do.” We’ll offer our congratulations – followed by useful financial and tax planning advice.
Don’t wait too long after the wedding to spend a little time on tax matters. Here’s a checklist of things to consider:
If you have questions about taxes and marriage, please contact Cray Kaiser today.