Taxes: marriage penalty/bonus

redheadbride15 · April 2015

I'm a very visual person and I love graphics. I just came across this in today's New York Times:

http://www.nytimes.com/interactive/2015/04/16/upshot/marriage-penalty-couples-income.html?hp&action=click&pgtype=Homepage&module=second-column-region&region=top-news&WT.nav=top-news&abt=0002&abg=0

It just struck me that the way I think about taxes will change when I'm filing next year (as a married woman!!!). I think we're in the zone where it probably won't make much difference if we file individually or jointly, but this may change over time. It just adds a whole new layer of complication to taxes that I hadn't really considered before.

labro · April 2015

I really like this graphic.

We're on the border between paying a penalty and getting a bonus. We found that out when we filed our taxes this year and we were really lucky we didn't hit that threshold where you end up paying significantly more. This year or next year, I think we'll cross that threshold unless we start contributing significantly more to our 401ks. I actually upped my contribution to 15% this year, which will help for now.

kvruns · April 2015

I did the calculator and it came out at 0 change

JennyColada · April 2015

This year was pretty much a wash. Moving forward, we will have a bonus.

Although, we have a major penalty for married versus pre-married.

theartistformerlyknownas · April 2015

We got hit with a pretty big penalty. Went from H getting a several hundred dollar refund and me owing a hundred bucks or so, to owing a couple thousand.

Uncle Sam says fuck you to wage equality. Chances are if you make nearly the same amount as your spouse, you get a penalty.

madamerwin · April 2015

Interesting graphic! Filing jointly will work in our favor - for once I'm glad FI earns significantly more than I do.

redheadbride15 · April 2015

lolo883 said:
We got hit with a pretty big penalty. Went from H getting a several hundred dollar refund and me owing a hundred bucks or so, to owing a couple thousand.

Uncle Sam says fuck you to wage equality. Chances are if you make nearly the same amount as your spouse, you get a penalty.

THIS. I had no idea these tax differences existed. FI and I earn almost exactly the same amount, which means we're likely to be penalized going forward, especially if we add a kid to the mix.

Why is our tax system so f'd up? Also, why do I pay a higher percentage in taxes than some people who earn 10x as much as me just because I don't have access to any of the standard tax loopholes? End rant.

huskypuppy14 · April 2015

We got hit with a pretty big penalty. Went from H getting a several hundred dollar refund and me owing a hundred bucks or so, to owing a couple thousand.

Uncle Sam says fuck you to wage equality. Chances are if you make nearly the same amount as your spouse, you get a penalty.
THIS. I had no idea these tax differences existed. FI and I earn almost exactly the same amount, which means we're likely to be penalized going forward, especially if we add a kid to the mix.

Why is our tax system so f'd up? Also, why do I pay a higher percentage in taxes than some people who earn 10x as much as me just because I don't have access to any of the standard tax loopholes? End rant.

How will adding a kid make you pay more. You'll get another deduction for that.

Also, our tax rates in general are really low. Obviously, no one likes paying taxes, but it's a necessary evil. Don't be surprised if the tax rates increase.

http://www.businessinsider.com/history-of-tax-rates

redheadbride15 · April 2015

I'm not sure why the marriage "penalty" seems to be worse for most couples with children, but according to the second graphic in the article linked to in the OP it seems to be the case for almost everyone except low-income couples or couples with one major earner. Somehow the child deduction must work differently for single parents vs. households with two earners, and I'd have to read more carefully to understand why this is the case.

The point of my post was not that taxes are bad, only that they're complicated. You have to be pretty savvy and/or connected to a good accountant to minimize the amount you pay within the laws. I'm a happy taxpayer but I'm continually educating myself so I can keep up with the billionaires who seem to pay a smaller percentage of their income in taxes than I do.

julieanne912 · April 2015

huskypuppy14 said:

We got hit with a pretty big penalty. Went from H getting a several hundred dollar refund and me owing a hundred bucks or so, to owing a couple thousand.

Uncle Sam says fuck you to wage equality. Chances are if you make nearly the same amount as your spouse, you get a penalty.

THIS. I had no idea these tax differences existed. FI and I earn almost exactly the same amount, which means we're likely to be penalized going forward, especially if we add a kid to the mix.

Why is our tax system so f'd up? Also, why do I pay a higher percentage in taxes than some people who earn 10x as much as me just because I don't have access to any of the standard tax loopholes? End rant.

How will adding a kid make you pay more. You'll get another deduction for that.

Also, our tax rates in general are really low. Obviously, no one likes paying taxes, but it's a necessary evil. Don't be surprised if the tax rates increase.

http://www.businessinsider.com/history-of-tax-rates

According to those charts, FI and I would get a bonus once married. Once having a kid, apparently we'd be penalized. Not sure how that works.

huskypuppy14 · April 2015

redheadbride15 said:
I'm not sure why the marriage "penalty" seems to be worse for most couples with children, but according to the second graphic in the article linked to in the OP it seems to be the case for almost everyone except low-income couples or couples with one major earner. Somehow the child deduction must work differently for single parents vs. households with two earners, and I'd have to read more carefully to understand why this is the case.

The point of my post was not that taxes are bad, only that they're complicated. You have to be pretty savvy and/or connected to a good accountant to minimize the amount you pay within the laws. I'm a happy taxpayer but I'm continually educating myself so I can keep up with the billionaires who seem to pay a smaller percentage of their income in taxes than I do.

I think the graph is comparing two unmarried people with a child vs a married couple with a child (same income). The unmarried couple will usually pay less taxes because one person will claim the child, and you can decide which person takes the deduction to minimize your taxes.

But if you compare yourself- a married couple, no kids vs. yourself as a married couple with a child, the married couple with a child will pay less taxes. I hope I'm explaining this correctly.

It's not accurate to just compare your refund this year as married (for example) compared to last year as single.

jenna8984 · April 2015

huskypuppy14 said:

We got hit with a pretty big penalty. Went from H getting a several hundred dollar refund and me owing a hundred bucks or so, to owing a couple thousand.

Uncle Sam says fuck you to wage equality. Chances are if you make nearly the same amount as your spouse, you get a penalty.

THIS. I had no idea these tax differences existed. FI and I earn almost exactly the same amount, which means we're likely to be penalized going forward, especially if we add a kid to the mix.

Why is our tax system so f'd up? Also, why do I pay a higher percentage in taxes than some people who earn 10x as much as me just because I don't have access to any of the standard tax loopholes? End rant.

How will adding a kid make you pay more. You'll get another deduction for that.

Also, our tax rates in general are really low. Obviously, no one likes paying taxes, but it's a necessary evil. Don't be surprised if the tax rates increase.

http://www.businessinsider.com/history-of-tax-rates

Many people also don't realize that their marginal tax rate is about 12%. They just compain 30% of my paycheck is gone!! Well yes....but 6% is going to your state, 7% to social security, 2% to medicare, 2% to FICA, 2% to SUI. The actual amount that's just straight up federal taxes is about 12%. And once you're of age, you will be reaping the benefits and getting the SSI & medicare so you really can't complain about those.

JennyColada · April 2015

jenna8984 said:
And once you're of age, you will be reaping the benefits and getting the SSI & medicare so you really can't complain about those.

You think that funding will last for 35 more years? HAHAHAHAHAHA

labro · April 2015

JennyColada said:

jenna8984 said:
And once you're of age, you will be reaping the benefits and getting the SSI & medicare so you really can't complain about those.
You think that funding will last for 35 more years? HAHAHAHAHAHA

Yeah, sorry but this. I'm kind of LOLing over the thought that I'll receive ANY SSI or medicare benefits when I retire 35 plus years from now (if I even get to retire in my 60s...). H and I are making our retirement plans without expecting to receive any sort of other benefits other than what we've managed to save up ourselves.

jenna8984 · April 2015

labro said:

JennyColada said:

jenna8984 said:
And once you're of age, you will be reaping the benefits and getting the SSI & medicare so you really can't complain about those.
You think that funding will last for 35 more years? HAHAHAHAHAHA
Yeah, sorry but this. I'm kind of LOLing over the thought that I'll receive ANY SSI or medicare benefits when I retire 35 plus years from now (if I even get to retire in my 60s...). H and I are making our retirement plans without expecting to receive any sort of other benefits other than what we've managed to save up ourselves.

Oh I'm making my plans without it as well. But I think there would be a fucking mutiny and raids and protests and shit if and when they just try to end it. Telling people who have paid in for 40 years that they won't get any is not going to go over well. So I think they (govt) will figure out a solution and make other cuts (or debts) to keep it going. We'll see!

JennyColada · April 2015

There is no way that SS can work when we retire under the way that it works now. It would have to be an entirely new system. The SS system can't even support our parents as they are getting to retirement age. The whole system is going to break down with the baby boomers. Will something else take its place? I think it should, because I do think that it's important to have a fail-safe for people who didn't plan as well (or didn't plan at all). But it definitely cannot be relied nor counted on, and unfortunately, this is all that some people have.

But the whole "don't complain because you'll reap the benefits" thing is, well...wrong. I won't be reaping the benefits. I'll be lucky to get even an iota of benefit.

theartistformerlyknownas · April 2015

LOL at most of us collecting SS ever. El. Oh. El.

And to the kids thing, the "penalty" they're measuring is the difference going from the year you were single to the year you were married, and whether or not you had a kid when that happened. It's not "when you have a kid, you'll be penalized even more" it's "IF you ALREADY have a kid, you'll be penalized more than the newlyweds who don't."

AprilH81 · April 2015

JennyColada said:
There is no way that SS can work when we retire under the way that it works now. It would have to be an entirely new system. The SS system can't even support our parents as they are getting to retirement age. The whole system is going to break down with the baby boomers. Will something else take its place? I think it should, because I do think that it's important to have a fail-safe for people who didn't plan as well (or didn't plan at all). But it definitely cannot be relied nor counted on, and unfortunately, this is all that some people have.

But the whole "don't complain because you'll reap the benefits" thing is, well...wrong. I won't be reaping the benefits. I'll be lucky to get even an iota of benefit.

The problem is two-fold. 1) Government raided the SS "trust fund" and is now playing a very large shell game to convince us all that there is enough money to fulfill its promises. 2) Baby-Boomers by and large (but not all) assumed that the government would take care of them with SS and Medicare and never planned for a rainy day.

hellosweetie1015 · April 2015

So I was playing with that.

It seems that we may get a "bonus" of $100, based on this year's tax laws, and based on what I *think* FI made - I can't remember the exact number, so it's screwy.

If I completely quit working and FI kept his job, we would get a $1,200 bonus.

If I quit working and FI got a new job (making ~ double what he does now), we'd get a $2k bonus.

Hurmmmm. Too bad our wages aren't living wages alone.

Taxes: marriage penalty/bonus

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