Marriage Tax Penalty Forum

[Anonymous User]

I'm getting married in November and our combined income will put us ovver to the next tax bracket for the year. She's been taking out itemized deductions and I have been taking standard deductions. In any event, I think we will be hit with a big tax bill this coming year. Any advice on how to minimize this marraige penalty?

[TheThriller]

Have you crunched your Haig-Simons income yet?

[kalvano]

There's not much you can do, the tax code sucks if you're married and have a pretty wide disparity in income.

[ookoshi]

When I got married I went from getting a 2k refund check to owing 1k in taxes. I bought a house the same year we got married too. Switching to itemized deductions and deducting mortgage interest wasn't enough (probably because interest rates are so low). #firstworldproblems

[nealric]

There's not much you can do, the tax code sucks if you're married and have a pretty wide disparity in income.

Actually, it's the opposite. In the aggregate, a couple will see a tax decrease when they get married if one spouse earns significantly more. If both spouses earn the same, their aggregate tax bill goes up.

But yeah, there is not all that much tax planning you can do if you are a regular employee. Most of the tax strategies that would apply to you are savings/retirement related.

[Big Dog]

max out your 401k and/or IRA.

[Old Gregg]

Get married in function but not in form. I don't understand why that's not being offered as a suggestion. Who cares if it's legally valid? Your insurance doesn't care anymore (they permit domestic partners), and you will have had all the other trappings of wedding (i.e., ring, ceremony, etc.), so what's the big deal?

[Anonymous User]

Get married in function but not in form. I don't understand why that's not being offered as a suggestion. Who cares if it's legally valid? Your insurance doesn't care anymore (they permit domestic partners), and you will have had all the other trappings of wedding (i.e., ring, ceremony, etc.), so what's the big deal?

Complicates things in a "divorce" and if one spouse dies. Low earning spouse loses out on potential social security benefits. May pose health insurance obstacles. No spousal privilege in court, etc...

[nealric]

Oops- accidentally hit anon. Above post was me.

[Old Gregg]

You can get married officially later...

[DELG]

I keep asking for a divorce. Awful.

[kalvano]

There's not much you can do, the tax code sucks if you're married and have a pretty wide disparity in income.

Actually, it's the opposite. In the aggregate, a couple will see a tax decrease when they get married if one spouse earns significantly more. If both spouses earn the same, their aggregate tax bill goes up.

But yeah, there is not all that much tax planning you can do if you are a regular employee. Most of the tax strategies that would apply to you are savings/retirement related.

I had the opposite problem because my spouses income was just enough to bump us up into another tax bracket.

[Tiago Splitter]

You can get married officially later...

Especially since he is getting married in November. Just wait until January to officially get it done.

[mickey0004]

Have a kid first so you can offset the marriage penalty with a child credit.

[BVest]

You can get married officially later...

Especially since he is getting married in November. Just wait until January to officially get it done.

Indeed. Financially it's easy enough to do a mockup of your taxes based on what you're expecting to make and have in deductions through the end of the year both individually and as a couple and see how it works out.

That said, if these concerns aren't being raised in the first place by your fiancee, it's probably worth whatever small hit you'll take to just make it official at the date of your wedding. (And trust me, the hit will be small compared to the discussion that will ensue if you're the one to broach the subject.)

[kalvano]

Have a kid first so you can offset the marriage penalty with a child credit.

That tax credit is overrated.

[Anonymous User]

You can get married officially later...

Especially since he is getting married in November. Just wait until January to officially get it done.

Indeed. Financially it's easy enough to do a mockup of your taxes based on what you're expecting to make and have in deductions through the end of the year both individually and as a couple and see how it works out.

That said, if these concerns aren't being raised in the first place by your fiancee, it's probably worth whatever small hit you'll take to just make it official at the date of your wedding. (And trust me, the hit will be small compared to the discussion that will ensue if you're the one to broach the subject.)

We actually realized this issue together, so we've been talking about it, including discussions about waiting to make it official in January. This may be the best way to go so we can plan our deductions out at the begining of the year. In any event, I posted this originally to see whether there was some clever ways that TLSers have come up with to minimize this, but it appears that there is none. We might just eat the tax bill.

[84651846190]

There's not much you can do, the tax code sucks if you're married and have a pretty wide disparity in income.

Wait, I thought it was particularly bad if you *didn't* have a wide disparity in income?

[kalvano]

There's not much you can do, the tax code sucks if you're married and have a pretty wide disparity in income.

Wait, I thought it was particularly bad if you *didn't* have a wide disparity in income?

See above. Apparently my wife and I fall right on a line that hurts us even worse because of the disparity in our income.

[legends159]

There's not much you can do, the tax code sucks if you're married and have a pretty wide disparity in income.

Actually, it's the opposite. In the aggregate, a couple will see a tax decrease when they get married if one spouse earns significantly more. If both spouses earn the same, their aggregate tax bill goes up.

But yeah, there is not all that much tax planning you can do if you are a regular employee. Most of the tax strategies that would apply to you are savings/retirement related.

I had the opposite problem because my spouses income was just enough to bump us up into another tax bracket.

But you're only taxed at the marginal tax rate so shouldn't really be a big deal.

[BVest]

When I got married I went from getting a 2k refund check to owing 1k in taxes. I bought a house the same year we got married too. Switching to itemized deductions and deducting mortgage interest wasn't enough (probably because interest rates are so low). #firstworldproblems

You were withholding too much before you got married. I generally calculate taxes at mid year and adjust WH for the rest of the year to a specific $ amount to avoid much of a refund or tax due. (Of course this is dicier if you're going to have some variable income that you can't predict. Just be sure your WH is at least 100% of last year's tax due and you're covered against any penalties).

[kalvano]

There's not much you can do, the tax code sucks if you're married and have a pretty wide disparity in income.

Actually, it's the opposite. In the aggregate, a couple will see a tax decrease when they get married if one spouse earns significantly more. If both spouses earn the same, their aggregate tax bill goes up.

But yeah, there is not all that much tax planning you can do if you are a regular employee. Most of the tax strategies that would apply to you are savings/retirement related.

I had the opposite problem because my spouses income was just enough to bump us up into another tax bracket.

But you're only taxed at the marginal tax rate so shouldn't really be a big deal.

I don't pretend to understand the tax code, but it was a fairly large deal because we were borderline at the one rate, and the move over the line meant a good chunk of income was taxed at the higher rate.

[Anonymous User]

There's not much you can do, the tax code sucks if you're married and have a pretty wide disparity in income.

Wait, I thought it was particularly bad if you *didn't* have a wide disparity in income?

See above. Apparently my wife and I fall right on a line that hurts us even worse because of the disparity in our income.

Because the difference between the threshold for single people filing separately and married filing jointly is marginal, this penalty pretty much impacts all upper-middle-class people getting married. We both are already at the top of our bracket filing seprately, so combining our income places us well within the next bracket. But this also would impact a couple who has a disparity in income. For example, if you're a second year associate making $175k, you would be in the 28% bracket filing as single, and if your signficant other makes $50k, he or she would be in the 25% bracket. After you get married, you will have a combined income of $225k, which places the both of you at the 33% bracket. In either scanario, you're subject to the penalty.

[BVest]

Just to see what kind of disparity of income is needed in order to see the penalty/bonus:

If you're looking at two young biglaw associates each making $185,000 and only claiming standard deduction you're talking $43,240 x 2 if single and $95,000 if married, so it's a fairly significant penalty of $8,500, or 2.3% of GI.

If you're looking at a biglaw/bigfed couple making $185/75k, you're looking at $43,240 + $13,000 if single and $57,700 if married, so a $1500 penalty or 0.6% of GI.

Finally, if you're looking at a biglaw/PI couple making 185/50k, you're looking at $43,240 + $6,800 if single and $49,600 if married, so you've now gotten into the marriage bonus world (even if it's only $400 or 0.2% of GI).

[DELG]

biglaw/biglaw: gaped