How does Marriage affect your taxes?
Tax Implications of Marriage.
Many individuals have a pre-nuptial agreement in place to protect their assets, however, not many people think about financial aspect of marriage. The one that etches on the finer details such as tax implications.
Often, when you sit down to discuss the finances with your fiancé, you may find yourself with disagreeing on certain topics. We have compiled some questions to assist you ascertain the various factors that may affect your marital relationship.
Factors to take into consideration:
A good question to ask your future spouse revolves around their current financial position. Are they in debt? Do they intend to make any financial sacrifices in the future that may jeopardize your joint financial nest-egg? If they plan on starting a business, then, do they have the necessary capital in place or will they borrow from the bank?
Do they have any type of budget in place and do they consistently adhere to it? Have they been in debt in the past and what caused it? These maybe difficult questions to ask, however, you are ultimately going to spend your life with this individual. It would be wise to have peace of mind rather than surprises along the way.
Another question to broach is their stance on credit cards, how do they feel about paying for things on credit? If they choose to pay in cash, this is a good indication that you will not have any credit card debt in the future.
What would they do if they had a sudden windfall of money?
How would they invest it or would they just blow it in one day? This is a good question to ask as you will understand their value of money.
If a person does win the lottery or inherit assets, there are taxes such as capital gains tax and inheritance tax to take into consideration. When you take it all into consideration, you have to think carefully about the answers that you receive from your future spouse.
When you get married and file jointly, you may enjoy lower tax rates. You are also responsible for your partner’s actions in terms of declaring income as it is filed mutually by both parties. If you decide to gift your partner luxurious gifts, both of you will be exempt from gift tax.