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Post by minnesotapaintlady on Oct 10, 2021 8:52:45 GMT -5
Married filing separately is a whole different animal. But two single people living together would not pay less taxes being married. I will contact our software company tomorrow and tell them their tax brackets are wrong. Before you do that, you might want to actually LOOK at the tax brackets and run some scenarios yourself. About the only situation where I see it's an advantage is if one spouse has no income or one is a high earner and one very low. But as long as they make within 10-20K of each other the tax situation is identical whether married or cohabitating. Once you get above the 32% bracket with both spouses, then being married is actually harmful as the brackets no longer are doubled. eta: The reason married filing separately is usually bad is not because of the tax brackets. It is because you are not eligible for all the credits when you file this way. However, you are both eligible for them all filing single. In fact, if you're both low income you probably come out better on the credit side filing single.
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Deleted
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Post by Deleted on Oct 10, 2021 11:20:58 GMT -5
Let's not forget the low-income end, where needs-based programs such as Section 8 housing, the Earned Income Tax Credit and Medicaid are based on joint income if you're married. If you're a single parent you may be better off not marrying. Sad that our social systems discourage marriage but they do.
And another advantage- marriage will make you liable for medical debts of your spouse. My Ex was unemployed and went into inpatient rehab for alcohol abuse and was too lazy to submit insurance claims. They kept billing us. He kept telling me he'd take care of it. I should have known better but I was too busy keeping the bills pad and working for a living.
Eventually they got a judgment against him. And tried to garnish MY wages, by an amount that really would have hurt. My attorney fought them off because we were in the process of divorce. They eventually got paid out of his share of the proceeds from the house, I fled the insurance claim and handed the reimbursements over to him- but what a wake-up call about the legal obligations you assume when marrying someone.
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Tiny
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Post by Tiny on Oct 10, 2021 12:08:27 GMT -5
I am single and my gross income is 120K I can and do put 30K into pretax account (401K,+catchup, HSA single plus catchup) My bro and is wife have a gross income of 120K (lets assume my bro and his wife also put 30K into pretax accounts)
Let's say the 2 of us have 90K in federally taxable income.
It looks like I'm paying 15,620.42 in taxes - and my sibling is paying 10,401.76 (using the ranges in the table above). Some of my income is taxed at 24%... not a whole lot - but some it is.
Is my math bad?
ADDED wait I forgot the "standard deduction...."
Does that make my single 90K - 77,450 and the other one 64,900 I've still got some of my income in a higher bracket than my married sibling.
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Post by minnesotapaintlady on Oct 10, 2021 14:10:21 GMT -5
I am single and my gross income is 120K I can and do put 30K into pretax account (401K,+catchup, HSA single plus catchup) My bro and is wife have a gross income of 120K (lets assume my bro and his wife also put 30K into pretax accounts) Let's say the 2 of us have 90K in federally taxable income. It looks like I'm paying 15,620.42 in taxes - and my sibling is paying 10,401.76 (using the ranges in the table above). Some of my income is taxed at 24%... not a whole lot - but some it is. Is my math bad? ADDED wait I forgot the "standard deduction...." Does that make my single 90K - 77,450 and the other one 64,900 I've still got some of my income in a higher bracket than my married sibling. You are comparing how your income alone would be if you were married to someone making $0. Instead calculate what your brother and his wife would be paying each making 60K compared to what they are paying now married at 120K. Or calculate with yourself marrying someone else making 120K.
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Deleted
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Post by Deleted on Oct 10, 2021 14:57:03 GMT -5
I wonder why the W-4 asks if you are married or single. I wonder why the payroll software programs require you to enter married or single. Maybe it's just the state I live and work in that has different rates for married and single.
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TheOtherMe
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Post by TheOtherMe on Oct 10, 2021 17:40:06 GMT -5
What goes on the W-4 for married or single has nothing to do with the filing status. Head of household is not an option on the W-4.
People who want extra withholding benefit by putting single on the W-4.
You might want to play around with it.
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CCL
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Post by CCL on Oct 10, 2021 18:13:24 GMT -5
Let's not forget the low-income end, where needs-based programs such as Section 8 housing, the Earned Income Tax Credit and Medicaid are based on joint income if you're married. If you're a single parent you may be better off not marrying. Sad that our social systems discourage marriage but they do. And another advantage- marriage will make you liable for medical debts of your spouse. My Ex was unemployed and went into inpatient rehab for alcohol abuse and was too lazy to submit insurance claims. They kept billing us. He kept telling me he'd take care of it. I should have known better but I was too busy keeping the bills pad and working for a living. Eventually they got a judgment against him. And tried to garnish MY wages, by an amount that really would have hurt. My attorney fought them off because we were in the process of divorce. They eventually got paid out of his share of the proceeds from the house, I fled the insurance claim and handed the reimbursements over to him- but what a wake-up call about the legal obligations you assume when marrying someone. Did you actually think you wouldn't be held responsible for your husband's bills? I would have assumed the opposite.
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tallguy
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Post by tallguy on Oct 10, 2021 18:28:53 GMT -5
Let's not forget the low-income end, where needs-based programs such as Section 8 housing, the Earned Income Tax Credit and Medicaid are based on joint income if you're married. If you're a single parent you may be better off not marrying. Sad that our social systems discourage marriage but they do. It is not just those types of programs that you would lose, and not just income tax that matters. Even normal tax rules for everybody could have an effect. I have said on other threads that I am limiting my income for tax purposes. By keeping my official income under $40,000 I can qualify to save many thousands on my property tax. Additionally, at that level my SS benefits are not taxed, and $12,000 or so out of my IRA is not taxed. Any other benefits I might be able to qualify for would be on top of that. My GF and I have been together for a few years. We don't live together and have no plans to get married, even though we are fully committed to each other. We are both financially independent and secure, we both have nice big houses that we like and don't want to sell, and we both have investments that either do or could provide good income. We also both have kids to whom we will leave our respective estates, and marriage might screw that up. Neither of us feel that marriage would have any effect on the relationship or the commitment, and we are far beyond needing society's imprimatur to appear "acceptable" to other people, so that reason for marriage does not exist. Regardless, it would probably cost me about $15,000 per year to be married instead of not. Some of that would likely be offset by a beneficial effect on my GF's taxes due to having more space in lower brackets, but it is highly doubtful we would come out ahead overall. We are both above the 25-54 age range in the study above (so I guess we don't count), but I would not consider either of us to be unpartnered. We just don't live together, and there is no problem with that.
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Post by minnesotapaintlady on Oct 10, 2021 18:37:08 GMT -5
Let's not forget the low-income end, where needs-based programs such as Section 8 housing, the Earned Income Tax Credit and Medicaid are based on joint income if you're married. If you're a single parent you may be better off not marrying. Sad that our social systems discourage marriage but they do. And another advantage- marriage will make you liable for medical debts of your spouse. My Ex was unemployed and went into inpatient rehab for alcohol abuse and was too lazy to submit insurance claims. They kept billing us. He kept telling me he'd take care of it. I should have known better but I was too busy keeping the bills pad and working for a living. Eventually they got a judgment against him. And tried to garnish MY wages, by an amount that really would have hurt. My attorney fought them off because we were in the process of divorce. They eventually got paid out of his share of the proceeds from the house, I fled the insurance claim and handed the reimbursements over to him- but what a wake-up call about the legal obligations you assume when marrying someone. Did you actually think you wouldn't be held responsible for your husband's bills? I would have assumed the opposite. I think her point was it's just another disadvantage to getting married over cohabitation. I think most (or at least a lot more) people are fine with paying a spouses bills while married, but if you're in the middle of a divorce and they start running them up its a lot harder to stomach, especially if they're doing it on purpose knowing you're liable for half...which happens a lot unfortunately.
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Deleted
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Post by Deleted on Oct 10, 2021 19:08:05 GMT -5
What goes on the W-4 for married or single has nothing to do with the filing status. Head of household is not an option on the W-4. People who want extra withholding benefit by putting single on the W-4. You might want to play around with it. Oh. Why would they take out more taxes if you are single?
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raeoflyte
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Post by raeoflyte on Oct 10, 2021 20:12:23 GMT -5
What goes on the W-4 for married or single has nothing to do with the filing status. Head of household is not an option on the W-4. People who want extra withholding benefit by putting single on the W-4. You might want to play around with it. Oh. Why would they take out more taxes if you are single? The same issue comes up if you have a 2nd job. I worked a part time job at a movie theater and didn't pay any attention to my w4 at either job (claimed 0 for both). My 2nd job withheld taxes as if I only made $50 a week, and my main job withheld as if that was my only income. But I was earning both incomes so that 2nd job should have been taxed more (and ultimately was, just not until tax time). I believe w4's are slanted toward 1 income households.
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thyme4change
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Post by thyme4change on Oct 10, 2021 20:28:52 GMT -5
so I am "unpartnered" now, as I was in the last census. I'd be curious for the anecdotal data from the 2020 census that I don't consider to be valid with all the garbage from teh previous administration about how the questionnaires would be administered. but, back to topic, I'm employed FT and have been since graduating college, and I'm on my way to being economically independent. I'm still paying off some stupid life choices. "On average" and "less likely" leaves a tremendous amount of room to not fit that part of the description.
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Deleted
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Post by Deleted on Oct 10, 2021 20:55:30 GMT -5
I think her point was it's just another disadvantage to getting married over cohabitation. I think most (or at least a lot more) people are fine with paying a spouses bills while married, but if you're in the middle of a divorce and they start running them up its a lot harder to stomach, especially if they're doing it on purpose knowing you're liable for half...which happens a lot unfortunately. I understood the law. My point was that when you marry this is a potential liability that can hit you that would not be an exposure if you never married your partner.
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Post by The Walk of the Penguin Mich on Oct 10, 2021 23:18:01 GMT -5
What goes on the W-4 for married or single has nothing to do with the filing status. Head of household is not an option on the W-4. People who want extra withholding benefit by putting single on the W-4. You might want to play around with it. Oh. Why would they take out more taxes if you are single? Because you have fewer personal deductions. A single person has a personal deduction of $12,500. A married couple can deduct $25,000. That deduction of a second person lowers your AGI, and the amount of income taxed. So a single person making the exact same as a married couple will pay more in taxes.
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Deleted
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Post by Deleted on Oct 11, 2021 6:47:45 GMT -5
Oh. Why would they take out more taxes if you are single? Because you have fewer personal deductions. A single person has a personal deduction of $12,500. A married couple can deduct $25,000. That deduction of a second person lowers your AGI, and the amount of income taxed. So a single person making the exact same as a married couple will pay more in taxes. And then the tax bracket end points are higher for Marrieds so that it takes a bigger taxable income for Marrieds to get the higher tax rates applied. On W-4s- yes, those are a a joke if you have a second income (from a spouse or another job) or significant investment income. I just remembered that when I was a single mother with a big mortgage and the property taxes to go with it, I declared 10 exemptions on my W-4 even though I had only DS. I got a refund every year because of the mortgage interest, property tax, state income tax and charitable deductions. Before that when I was married to the Ex and he was employed, we had extra withheld for State because one of our incomes was essentially taxed at the highest marginal rate .
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TheOtherMe
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Post by TheOtherMe on Oct 11, 2021 7:55:59 GMT -5
What goes on the W-4 for married or single has nothing to do with the filing status. Head of household is not an option on the W-4. People who want extra withholding benefit by putting single on the W-4. You might want to play around with it. Oh. Why would they take out more taxes if you are single? Question? Are you advising people on W-4's? Do some withholding calculations and you will see what happens if you claim married for two people or have more than one job. You will owe taxes at the end of the year. That's fine if you want to pay, but it doesn't work if you prefer a refund. I think more study of how a W-4 works. You said you were not a CPA. Are you preparing tax returns or just inputting information given to you by your co-workers?
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Deleted
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Post by Deleted on Oct 11, 2021 9:11:09 GMT -5
Oh. Why would they take out more taxes if you are single? Because a single person making X dollars pays more in taxes than a married person making the same. But, the W4 is notoriously inaccurate for multiple incomes and often one spouse has to set theirs at single or even single with an extra amount being withheld to break even. Aha! Exactly! Previously you said tax laws were not written to encourage marriage.
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Deleted
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Post by Deleted on Oct 11, 2021 9:13:36 GMT -5
Oh. Why would they take out more taxes if you are single? Question? Are you advising people on W-4's? Do some withholding calculations and you will see what happens if you claim married for two people or have more than one job. You will owe taxes at the end of the year. That's fine if you want to pay, but it doesn't work if you prefer a refund. I think more study of how a W-4 works. You said you were not a CPA. Are you preparing tax returns or just inputting information given to you by your co-workers? I advise many people on W-4s. I do many payrolls. When people are surprised they owe on their income taxes, I know how to change that. I was curious of your answers. LOL You do you.
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bean29
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Post by bean29 on Oct 11, 2021 10:55:06 GMT -5
Never got around to getting married. Was engaged twice. Now, I don't think I'd have the tolerance to share space with someone. My own messiness is enough. I wouldn't want to deal with theirs, too, or, on the flip side, they being super clean and irritated that I'm not. lol. I always think this will be a problem for my DD. Unless you pair up with a clean freak that does not mind cleaning up after you... I plan to live alone if anything happens to my DH.
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Tiny
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Post by Tiny on Oct 11, 2021 12:47:03 GMT -5
Aha! Exactly! Previously you said tax laws were not written to encourage marriage. I never once said the tax brackets weren't different. In fact I even posted them for you because you seemed to think they were skewed to married.
LOOK at them.
Two single people with taxable income of 50K after a 12K standard deduction each have a 22% marginal rate. They tie the knot, they now have a 100K taxable income after a 24K standard deduction and....would you look at that....a 22% marginal rate!
Or another example...
Single A - 30K taxable - 12% marginal, marries Single B with a 70K taxable - 22% marginal rate. Now they're at 100K taxable married and Single A that was only paying 12% gets bumped to 22% and Single B gets no break, they're still in the 22K bracket they were before.
But yes. A SINGLE person making 100K pays more taxes than TWO PEOPLE making 100K combined and filing married.
OK. I've figured out what's "clouding" my mind on this. I am comparing my income to my married sibling (or coworkers) who have a similar income (with one breadwinner). And the examples are for two breadwinners each earning less than I am but combined equal my income. I get it I don't see how the tax laws don't make couples lean towards the financial benefits of marriage at some income levels.
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pulmonarymd
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Post by pulmonarymd on Oct 11, 2021 14:02:43 GMT -5
Yes, it is best to think of this a "per capita income". Makes more sense
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thyme4change
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Post by thyme4change on Oct 11, 2021 14:29:02 GMT -5
Aha! Exactly! Previously you said tax laws were not written to encourage marriage. I never once said the tax brackets weren't different. In fact I even posted them for you because you seemed to think they were skewed to married.
LOOK at them.
Two single people with taxable income of 50K after a 12K standard deduction each have a 22% marginal rate. They tie the knot, they now have a 100K taxable income after a 24K standard deduction and....would you look at that....a 22% marginal rate!
Or another example...
Single A - 30K taxable - 12% marginal, marries Single B with a 70K taxable - 22% marginal rate. Now they're at 100K taxable married and Single A that was only paying 12% gets bumped to 22% and Single B gets no break, they're still in the 22K bracket they were before.
But yes. A SINGLE person making 100K pays more taxes than TWO PEOPLE making 100K combined and filing married.
The tax code has been used to "encourage" a variety of things over the years. Marriage is definitely one of them. Single mothers are most likely to need aid, so making marriage cheaper helps. There is a reason donations to churches are tax deductible and mortgage interest used to be tax deductible, and capital gains are taxed quite low. I'm sure if I understood CRT I could argue our tax code is racist.
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tallguy
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Post by tallguy on Oct 11, 2021 16:08:47 GMT -5
The tax code has been used to "encourage" a variety of things over the years. Marriage is definitely one of them. Single mothers are most likely to need aid, so making marriage cheaper helps. There is a reason donations to churches are tax deductible and mortgage interest used to be tax deductible, and capital gains are taxed quite low. I'm sure if I understood CRT I could argue our tax code is racist. As a single mother filing HOH and getting EIC, additional child tax credit and my son qualifying for Pell and state grants for college, I don't see how me being married would be cheaper from a tax standpoint than shacking up at all. In fact, financially it would be downright stupid for me to get married (well, unless I married someone really rich and old with no prenup of course. )
Yes, you as an individual would be worse off financially if married, as would I. Your prospective spouse may be better off if married. Whether the two of you combined would be better or worse is the question, and it could go either way depending on what the actual numbers were.
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