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June 10, 2008

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I'd agree; for the last 8 years, my CTA has run our taxes jointly and separately, and doing them jointly has won each time. Of course, I make a lot more money than my Gradual Student wife, so it does stand to reason we'd be better off filing jointly.

The 'penalty' wasn't part of my/our decision to marry, but I certainly noticed it that April. Averages mean nothing when it's you who are impacted in a big way. Not sure what you mean 'the more you make the more you pay'. Two people's total tax bill should not rise just because they are married. Worst case, it should be tax neutral.
Joe

My husband and I each make a pretty good amount of money. And we pay more in taxes because we're married filing jointly than we would if we were each filing as single, making the same amount of money. *That's* the marriage penalty.

If the marriage penalty is a myth, someone tell the IRS because they sucked about $1200 out of me for getting married.

Umm, doesn't this article confirm the marriage "myth?" The marriage "myth" as far as I understood it says that people with similar incomes may wind up paying more money in taxes jointly than they did filing separately. The article says the same thing. I'm afraid that I'll be in that group also as my fiance's and I's incomes are very close.

If it would be cheaper to live together without getting married, then there's a marriage penalty. It looks like that's the case for some people in the US.

The marriage penalty went away with the Bush tax cuts. Prior to those there most definitely WAS a marriage penalty which many folks in this article are probably still referencing. Of course Obama will change that to make taxes fair - read 51% of the population will not pay taxes and ride the backs of the rest of us. Also the capital gains taxes will go up despite the fact that 79% of all those claiming capital gains last year made under $100k and the fact that any rise in the capital gains tax has led to a decrease in tax revenue.

I know that when we got married in 2002, we owed 3,000 the our first year after neither of us really owing when we were single. Our tax bill was horrendous for the first couple of years of marriage.

Yes, we did have similar incomes.

IANACPA but my guess this is due to graduated taxes.

A person making 50,000 pays a smaller percent in tax than a person making 100,000. So while the person making 50,000 maybe pays 8,000 in tax, the person making 100,000 (twice as much income) pays more than 16,000 (i.e. more than twice as much) in taxes.

So two single people making 50,000 apiece will together pay 16,000 in taxes, but married, they make 100,000 together, and pay more than 16,000 in taxes (more than 8,00 each) because the bracket goes up.

The "marriage penalty" only starts to kick in when your income falls within the 25% tax bracket. The standard deduction is the same between single and joint married, and the tax rates are the same in both the 10% and 15% brackets.

Happy Rock - Don't confuse having to owe on April 15 with paying more taxes overall. Unless you and your spouse did end up in the 25% tax bracket or higher than you weren't subject to the marriage penalty. It's just that the W-4 calculations are stupidly complicated for married people who make about the same, so you weren't withholding enough after you got married. I'm guessing you changed your status to "married" but didn't change your number of allowances.

It sounds like some people are talking about the difference between "married filing jointly" vs "married filing separately", but my understanding is that the marriage penalty is about paying more after you get married than you would if you were both single and living together. My husband and I certainly paid a marriage penalty, and it absolutely did not go away with the Bush tax cuts. Before we got married we each had always gotten at least a couple of hundred dollars back in income tax. The first year we were married we owed something like $4,000. We were so stunned my husband ran the tax software again to see what it would be if we could file as single people and we both would have gotten refunds. We continued to owe a significant amount every year even after we changed our exemptions to 0. Filing as married pushed our AGIs up from the 15% tax bracket each to the 25 or 28% bracket. We are in better shape now that we bought a house and can take the mortgage deduction and have 2 kids. But I am here to say, we are paying 25-28% of our income in taxes, where if we were just living together we would still be paying 15%. Originally my husband made probably 40% more than me but now it's more like 20%.

Let's do away with the marriage penalty. Let's make everyone file individually and be done with it. (I can just hear all the complaining then.)

The marriage penalty is different than choosing to file Married, Filing Joint or Married, Filing Separate. In nearly every case, it is better to file MFJ, but there are always exceptions of course.

The reason there is a "marriage penalty" is that the tax brackets for married couples are not 2 times the same bracket for single folks. Whoever said this starts at the 25% bracket is exactly right. For 2007 (which I believe is after the Bush tax cuts that were supposed to fix the problem) the 25% MFJ bracket is 63,701 - 128,500, which is less than twice the Single bracket of $31,851 - 77,100. It is this way in the 28% and 33% brackets as well. In fact, the 33% bracket for both MFJ and Single ends at $349,700. Go figure!

Vote for me!!

No tax on any form of income (earned income, capital gains, dividends, inheritance etc) for those at or below the poverty level.

A flat rate on all forms of income for all earners above the poverty level. No deductions allowed. NONE!!!

Sorry, rwh, that's pretty much how we got into this mess.

Other penalties come into play like phaseout levels for deductions such as student loan interest. I am putting off getting married because of the tax penalty. My significant other would end up missing out on the student loan deduction (which adds up to $600/year) on top of having having more income subject to 28% vs. 25% or lower. It just doesn't make any sense. That extra thousand or so dollars makes a huge difference when you are young and starting out!

Not a comment on the marriage penalty, but I have to laugh at #1 poster Rod's Freudian slip of having a "Gradual Student" wife. I knew lots of people in college who were also very gradual.

Adding my voice to the chorus of "never owed until"s. My wife & I filed jointly after our first full year married. We owed the feds $2300 (exactly) and ~$600 to the state. We went from single, one deduction for both to married, no deduc's for her, two deduc's for me.

Again, no house, no kids, so we took it on the chin. We just bought a foreclosed condo at an exhorbitant rate, so we're hoping that gets resolved. Now we just have to deal with Chicago's totally obscene property tax.

I see. So our government penalizes me for marrying someone who works and has a similar income to my own, but if I had elected to marry a lazy loaf of a woman they would reward me in the form of reduced taxes. Bloody brilliant!

And people wonder why there is little confidence in our government!

The flat tax isn't "how we got into this mess." It could be how we get out of this mess. I agree completely with charging no income taxes below the poverty level and charging a flat rate above.

The problem is that you can't get away from deductions. How do you measure poverty level? Is it a flat amount for a household? Is it based upon how many earners and dependents are on the tax return? Does it change from one state or city to the next? Does it matter if you own or rent your house? You still have to make some decisions and allow some different deductions for different households.

I may have got a federal tax break when I married my wife, but I got a huge shopping tax bill.

It seems to me someone, somewhere, always gets shafted by income tax laws. Why not do away with income tax altogether? Income tax has not always existed in this country.

Increase the sales tax. Let federal and state governments operate off that, and that alone. Wouldn't that be fairer than what's currently implemented with these complicated unwieldy constantly-changing tax codes?

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