OK, I don’t expect you to do my taxes for me, but I’m getting surprising numbers here and was looking for a sanity check of someone to say “Yup, same thing happened to me”. Basically, for last year (2012), would you expect a married couple with one average income (~50K) and one high income (~500k) to pay significantly more in taxes than two single people? We have very simple returns – no kids, no mortgage deductions, no unusual situations, neither of us is self-employed, we have only simple investments. The only significant deduction is we live in a high tax state, so I get a big deduction for itemized state taxes, but with her lower income, she just takes the standard deduction. But filing as married forces us BOTH to itemize or BOTH to take the standard deduction, so that seems to hurt us.
From the 2012 tax tables, it looks like if there were no deductions, we’d pay exactly the same federal tax whether we were married or single; but according to TurboTax, after factoring in deductions and state taxes, we’d pay about 10 grand more to be married than to be single. Does this sound plausible? Any other dopers in a similar situation where one partner has a much higher income than the other?
My actual situation is I’m not married yet, we’re computing our taxes as a hypothetical. Based on what I’m seeing, it looks like tax-wise, we’re much better off not getting legally married. But I’m really shocked that the tax system could be designed that weird. See my other post – it seems far more logical to just have the tax system allow married people to file as individuals (using the “Single” rules if they want).
$500,000 is a high enough income for the alternative minimum tax to kick in, and that may have pulled her income into a much higher tax bracket than it normally would have.
The part I bolded indicates you’re comparing to married filing separately. That’s almost always a very bad deal. Did you compare to married filing jointly?
Yes, we did hypothetical returns as “single”, “married jointly” and “married separately”. Married-separately was by far the worst. But I was surprised that married-jointly was still significantly worse than single.
There are a significant number of legal rights that go along with being married - inheritance, splitting property on divorce… remember the stories by gay couples about one not being allowed in the room when the other was sick because they were nto “family”. etc. etc.
With these benefits come disadvantages. You are sharing many household expenses with certain legal benefits, your taxes can be higher.
Editorially, your monthly pay is more than half of the people earn in a whole year, and you are fussing about the taxes on an extra $50K of family income? What are we talking about, an extra $30,000 on joint income of $550,000? Extra $20,000? You are paying for the “you didn’t build that” stuff - the roads, bridges, regulated banking, air traffic control, FCC-regulated television, OSHA-regulated food safety, and everything else that allows you to enjoy the lifestyle you’ve earned.
I’m in a same-sex marriage so I have to file my federal taxes as single, BUT I also have to fill out a dummy federal tax form as ‘married’ to properly do my state income tax (yay me). Anyway, I’ve done this since same-sex marriage became legal in Massachusetts (2004) and every year the two single returns have lower tax than the married one.
Since I’m Canadian, all this sounds foreign (as well as weird) to me.
So what changes? Do some deductions disappear?
Does the household income get lumped together and taxed at one rate so the lowest income is taxed at the high rate?
Our experience was similar to your situation: one of us was making $45K and one of us was making $99K. We were in very different tax brackets.
When we got married, the tax brackets shifted so that either one of us individually would have been paying a lower percentage, but with our incomes combined we ended up paying the same percentage that the $99K salary had been paying, but for the $45K income also.
So yeah, while we both worked, we paid more taxes for being married.
Your editorial is unwarranted. Where did I “fuss” about taxes on the extra $50K? Where did I complain about having to pay taxes? Where did I say my taxes was too high?
All I said was that it seems very strange that two married people with a certain income have to pay more tax than two otherwise identical people with the exact same income who are living together but not married. Surely, you’d agree with me on that, no?
All I can say is that taxes can get complicated when you get up to your income level. Lots of deductions and exemptions get limited or eliminated entirely, and of course there is the Alternative Minimum Tax. Someone would have to look at the specifics in detail to tell you what is going on.
If one person makes $500,000, $50,000 is roughly income for the spouse that makes married filing jointly have same tax as if they were single and filing separately. If the second person makes less than $50k, married filing jointly has less tax than singles, but singles is cheaper if the second person makes more than about $50k. That is assuming the better defined case of standard deductions, no children, since you didn’t give what the deductions are.
The tax code does seem to make some implicit assumptions in trying to be fair. For example, being married results in lower taxes if one person works and the other doesn’t have a paying job but cares for the kids. If two people each make more than $388,350, two singles pay about $22,000 less in tax than if they filed as married, and that difference stays constant as their incomes increase. Perhaps there is an implicit assumption that two working singles live in different homes- it does cost more ($22,000 more?) to maintain two homes than one home with two people living there.