ScaredyCatGuide to Investing – Did Marriage Just Hit Your Tax Bill?
Apparently there is a penalty for getting married – and no, having to deal with your in-laws is not it.
It’s a Financial Penalty
Below is a table of the Internal Revenue Service tax brackets.
Notice that brackets for those married filing jointly is not just double that of single filers in every income range.
Source: Internal Revenue Service
For people with lower incomes, the marriage penalty is not something you need to worry about. For single filers in the 10 or 15 percent tax bracket incomes top out at $9,225 and $37,450, while the upper limit is exactly twice that for married couples.
No harm no foul, right?
However, that changes at the 25 percent tax bracket. For a single filer, this bracket tops outs at $90,750. If you double that number to get the amount for joint filers you’d get $181,500.
Mathematically you would be right. According to the IRS, you would be wrong.
For those married filing jointly, the 25 percent tax bracket tops out at 151,200.
You are being penalized for being married.
Exampe - If you and your partner each make 80k each – which is smack dab in what is considered middle class (per data from the pew research center)
Source Study
You would now be in the 28% tax bracket instead of the 25% as Single Filers.
But, wait. Can’t we just file separately?
Yes, that is an option. However, for married people filing separately the 25% tax bracket tops out at $75,600 as opposed to the $90,750. So again, you are now in the 28% tax bracket for getting married.
As you can see from looking at the table - this dilemma is actually exacerbated further the higher the tax bracket you reach.
The 33% tax bracket takes it on the chin the worst. As the married and individual level both top out at $411,500. I has to double check that as it baffles me, but yes it’s correct.
To all those Power Couples out there, you have been warned!
Atleast now we have an answer to who gives the worst wedding gift.
Uncle Sam!
Thank You IRS.
Regards,
Mitchell J
For more financial tips – click to
Something which might interest you is how the IRS lost a challenge by a same sex couple (registered domestic partners) in California challenged its mortgage deduction rules. The condensed version is they managed to double their mortgage and hoe debt deduction limit from $1.1 million per couple to $1.1 million ($2.2 million total) each because they were not married.
For the details: http://www.bloomberg.com/news/articles/2016-08-19/another-good-reason-not-to-get-married-courtesy-of-the-irs
Cool - will definitely check it out. Thanks!
I had no idea about this O.O maybe I'll get "married" by getting a pretty ring, Throwing a big party, and calling us husband and wife as result, But not actually fill out the paperwork. Right now the tax bracket thing wouldn't affect me, But I'm determined to make more money, So I'm not going to get married if it means paying more.
There you go! There's always a workaround for everything :-) The flipside of this is in the lower income brackets this can be used to one's benefit.
Let's say one person makes 45k thus in the 25% bracket and their potential spouse makes 25K, thus 15% bracket. If they get married, combined income is 70k and they both now fall in 15% bracket. A 10% tax savings for that couple! Until they get raises and go over 75K that is...lol
DANG IT! You can't win with this LOL.
With my business mindset I like to think I'll be making much more than 75k one day.
Yes, I believe you are well on your way :-)
This post has been linked to from another place on Steem.
Learn more about linkback bot v0.3
Upvote if you want the bot to continue posting linkbacks for your posts. Flag if otherwise. Built by @ontofractal