The tax code holds different taxation rates for married individuals, singles, and head of households. Over the years, tax experts and lawmakers at large have debated and endeavored to address the advantages and disadvantages that come with filing jointly as a married couple as opposed to filing as single. Depending on the tax bracket you belong to and the deductions and credits that you qualify for, getting married, or rather, filing jointly as a married couple, can either be positive or negative in terms of taxes. For some spouses, filing jointly may mean paying more taxes (with all other factors held constant) and with other spouses, filing jointly may mean less taxes to pay. In case you loved this short article and you want to receive more information about Married Couple Tax generously visit our own web-site. Those that pay less get a marriage tax bonus while those that pay more get a marriage tax penalty.
In the current tax code, the tax brackets for most of those who file jointly are almost two times that of singles and other filing categories. This means that even if both spouses earn the same amount of income, the tax bracket, whether they file as singles or as married jointly, remains the same. Therefore, for couples where one spouse earns significantly less than the other, chances are, they will enjoy a marriage tax bonus as the combined income will place them at a lower tax bracket.
However, having the bracket of joint returns being twice the brackets of singles has not always been the case. Prior to 2001, the tax system was skewed to where the tax brackets for joint filing were about 67% higher than that of the single filers. This meant that two individuals who earned the same amount of income would be have to pay more taxes if they got married and filed jointly, as their incomes would automatically go to a higher tax bracket. This tax penalty for getting married was a huge debate of the day, as the tax system seemed to favor the single and discourage marriage, at least tax-wise. However, to try and remedy this anomaly, President George W. Bush came up with a relief package that was set at removing the marriage penalty. However, instead of adjusting the tax brackets for the couples that filed jointly, the Bush tax relief just provided a few reliefs for those who had filed their taxes jointly.
Over the years, different government administrations have worked to eliminate the marriage penalty. To date however, some higher tax brackets still have a marriage tax penalty, as the taxes for those who file jointly is less than two times that of the singles. For individuals who earn more than $137,300.00, they will experience hefty tax penalties if their incomes are in the same bracket and almost equal because their combined incomes will push them into a higher tax bracket, as compared to the bracket that would apply if they filed as singles. Higher income earners, those earning $350,000.00 and above, could pay almost 10% more than if they filed as singles. The couples that earn such amount of money separately are still at a tax disadvantage while compared to their single counterparts.
Besides tax brackets, the credits and deductions differ in ranges between those that file as singles and those that file jointly. Therefore, whether you undergo a marriage tax penalty or a tax bonus depends on all these factors. Therefore, if you are planning to get married soon, ensure that you review the impact of your changes in filing status so you can be prepared when tax period comes.