Comments on: What is the Marriage Penalty Tax?

By: Stephanie

Stephanie — Tue, 06 Sep 2011 00:42:38 +0000

I wonder how many people decide not to get married strictly based on tax codes. Or for that matter, how many people DO get married.

By: Nam

Nam — Wed, 29 Dec 2010 19:55:43 +0000

Hope — I am in your boat. My partner and I also choose to not get married; and both of us can claim Head of Household on our tax return, saving us thousands each year.

By: reasonable

reasonable — Tue, 27 Jul 2010 20:43:52 +0000

There is no estate tax benefits to getting married unless one spouse has a net worth in excess of 3.5 million. AS long as each spouse has a net worth less than 3.5 million and each spouse makes over 67000/yr, about 20% of income couples in metro NY and California, you should not get married.
Speaker Pelosi and President Barak Obama are fervent supporter of the marriage tax penalty and is planning on increasing the penalty on more married couples in 2011.

By: PapaGeek

PapaGeek — Fri, 19 Mar 2010 17:31:48 +0000

Oops, I have to apologize for ranting too loudly. I checked my numbers on Intuit TaxCaster and everyone remains in the 15% tax bracket. A married couple with $40,000 SS benefit and $50,000 from an IRA pays $7,749 in taxes. A single person with $20,000 SS benefit and $25,000 from an IRA pays $2,526. The difference between two single people and a married couple is only $2,697, but that is still a lot higher and a lot sooner than the pre-retirement numbers.

By: PapaGeek

PapaGeek — Fri, 19 Mar 2010 16:24:18 +0000

You are young, so you are blind to the real marriage penalty. Pre-retirement the penalty doesn’t start until a couple has a combined income of $137,300. At that point a married couple and a pair of singles are all paying taxes at the 25% level. From $137,300 to $164,800 the married couple’s penalty kicks in at 28% vs. 25% which is only 3%. Their total penalty at $164,800 amount to only $825 in additional taxes. It is not until the marriage couple has a combined income of $209,250 that the next increase occurs from 28% to 33%. Boo Hoo! I feel bad for a couple making over $200,000 having to pay a little more.

Now, if you can drop your bias toward youth, let’s look at the real problem. The taxability of our social security benefits is based on our normal taxable income plus one half of the social security benefit. For a single person, if that amount is over $25,000, then 50% of the amount over $25,000 becomes the amount of social security that is taxed. if the basis goes over $34,000, then 85% is taxed until 85% of the total benefit becomes taxable. For example: a person get a $20,000 benefit check and takes another $25,000 out of their IRA. $25,000 plus half of $20,000 is $35,000. The first $9,000 of this amount, up to $34,000 means that 50% of their benefit ($4,500) is taxable, and the other $1,000 over $34,000 means that 85% of their benefit ($850) is taxable. Their gross income is $25,000 + $4,500 + $850 or $30,350.

The break points for a married couple are $32,000 and $44,000! Not $50,000 and $68,000! Doubling the single persons numbers, their combined benefit is $40,000 and their combined IRA withdraw in $50,000. Their basis is $70,000. Everything is double so far! The first $12,000 over $32,000 means that 50% of their benefit ($6,000) is taxable, and the other $26,000 means that 85% of their benefit ($22,100) is taxable. Their gross income is $50,000 + $12,000 + $22,100 or $84,100. Double the single person’s gross income is $60,700. They are going to pay income tax on an additional $23,400 of gross income. At the 25% bracket, that is an additional $5,850 dollars in tax!

Hey!!! Lucky them!!! They have hit the max of 85% of their benefit, so only $34,000 can be taxed, not $34,100. My numbers are wrong! That last $100 wasn’t taxed at 25% so their maximum marriage penalty is only $5,825 when their combined gross income is $90,000 ($40,000 benefit plus $50,000 IRA). Compare that to the $825 penalty they had prior to retirement at the $209,250 income level.

By: govenar

govenar — Wed, 10 Mar 2010 22:37:40 +0000

Interesting theory… is that intention documented somewhere? My guess is that the reason behind it is more related to the number of votes or amount of money politicians thought they could get.

By: Matt

Matt — Wed, 10 Mar 2010 19:48:07 +0000

Maybe most commenters here are concerned with practical considerations, while I’m concerned with social implications, but I’m surprised no one has mentioned the reason behind this so-called ‘marriage penalty.’ The name itself is misleading. It was not designed to punish people who get married; rather, it was designed to punish women in the workforce. For the most part, getting married has always had attendant tax breaks because from the state’s point of view, they enjoy the usual stability of marriage. Penalties like this came about to encourage women to leave the workforce and allow the re-entry of male war veterans following World War II. Note that the policy doesn’t punish marriage, it punishes the second income earner, which, historically speaking, is usually the female partner.

Not that I intend to lecture anyone here, as I’m sure bargaineering.com is not the place people turn to for social activism. However, it seems like this part of the ‘marriage penalty’ has been completely overlooked due to lack of knowledge, not just interest. We have no hope of correcting ridiculously sexist laws and statutes if we’re not even aware of them.

By: Mike

Mike — Mon, 08 Mar 2010 00:06:38 +0000

I’m sure glad I’m not married yet. I don’t have to deal with that bull. My finances are fine as a single.

By: Soccer9040

Soccer9040 — Sat, 06 Mar 2010 04:18:10 +0000

Yea, married filing separately can really get you if you are in a high income situation.

By: Soccer9040

Soccer9040 — Sat, 06 Mar 2010 04:14:30 +0000

Married filing separately closes some tax advantages for you if you have a complex tax situation. But I hope if you had a complex situation you would not be doing your own taxes.

By: Chris

Chris — Thu, 04 Mar 2010 04:27:14 +0000

The Marriage Tax is BS. I don’t own a home (don’t want to). Do not have children (don’t want any) and my wife and I are doing well for ourselves. But because we do not own a home or want kids we take a huge hit!

Honestly I don’t see how this is remotely fair play? Why should people that have a home and kids get more and more back while I just sit here and pay more and more in? Yes, it is right to get back based on the fact that you have dependents. But for me to cover that money for you based on the fact that I do not have them?

Filing jointly kills us. If filed (single) I would get back close to 10K and she would be looking at 2K. Instead we are looking at a 1K return. THAT IS AN 11K LOSE! How in the word is this remotely legal or right?

If we file married yet seperate it is even worse!

By: Jocelyn

Jocelyn — Tue, 23 Feb 2010 23:39:47 +0000

Just an observation here, but the Social Security survivor benefits really aren’t as great as I thought they were. My grandfather passed away last month. He was 82 and on SS. He and my grandma, age 70, were married for over 50 years. Because she still works as a special education teacher, she was awarded a ONE TIME Social Security death benefit of $255. She doesn’t want to retire yet because she loves her job, but I really think that it just isn’t fair.

By: Anonymous

Anonymous — Fri, 19 Feb 2010 06:02:57 +0000

I am looking forward to marrying my sweety a 66 year old retiree who makes approx $684/Mo.
I was taxed at 72k for 2009.
Q: will his social security income get reduced?
Q: what would be my most beneficial move for filing 2010 MFJ or MFS?

By: Mike

Mike — Thu, 18 Feb 2010 03:06:06 +0000

Haha, I know I haven’t yet and don’t plan to until I meet the right gal. I’m loving the single life so far though.

By: saladdin

saladdin — Mon, 15 Feb 2010 22:58:02 +0000

Or don’t get married.

saladdin