I got married and June and have been starting to pull together our tax info for the year. After crunching the numbers I realized we are going to get hit with over 10K in marriage tax penalties. I confirmed with our CPA that this is in fact going to be the case, ugh. We both make pretty decent salaries (mid level government workers), but nothing crazy, and we also live DC, which is crazy expensive, so you need a decent salary to live. 10K is more than 5% of our combined take home income from previous years, so I'm freaking out a little. Has anyone else run into this? Did you rebudget to make it work? I already went into payroll this week to change my deductions so we don't get slammed with a giant tax check in the spring, but it's certainly going to make this fall/winter a tight budget one.
Sorry for the mini rant. Don't worry, this will not throw us into crazy debt, I was just a little shocked at how high the number was.
Re: Sort of Unexpected Wedding Cost...
Did the numbers on that. It's actually worse, since the marginal brackets are shrunk for married filing separately.
Fwiw- not every couple gets hit with this. If your incomes go beyond a certain point when filing jointly, it kicks in.
I am hoping and praying and doing a rain dance and everything else possible to get out of my job by the end of this year and into a higher paying job. So IDK how that will affect things either.
DH was kind of pissed about it when he looked it up (when we first got engaged), so I changed my withholdings to 0.
I do taxes....not professionally but I do have an accounting degree and I do my own as well as some friends'.
You guys can use this calculator to estimate what your tax will be. Remember that your TAXABLE income is not just your straight salary. Take out any 401k and medical pre-tax items. For example my taxable income is about $9,000 less than my annual salary.
I got what our taxes owed will be and then I checked my YTD paystub and DH's YTD paystub and we've already hit the amount that will be due. So any taxes we pay from here to Dec will be our refund. It's quite simple if you always withhold 0 and I even have them withhold an extra $40 a week just to be super sure.
http://www.moneychimp.com/features/tax_brackets.htm
@bubblegum1309 As you can see from the chart I linked, the first 73k of you & DH's income is taxed at 15%. Only above that is taxed at 25%, so your marginal rate when you combine and average is only about 17%.
@lolo883 I know that all the financial experts will tell you to get your liability perfectly in line with your withholdings so that you don't get a refund, and let the govt hold onto your money for a year. But I don't give a shit. I'd rather have the excitement of getting a few thousand dollars in a lump sum rather than make about $30 in interest over the year. Also most people (not me) wouldn't end up saving that money and earning the interest, they'd spend it.