Hot damn! Now this is some exciting stuff: taxes, the marriage penalty, and single-vs.-joint filings.
I used to be in the Marine Corps. Right after boot camp, some buddies in my platoon—ages 18, 19, 20 at the oldest—got married to their high school sweethearts, shrewdly calculating that, if they get married now, they would be eligible for “marriage housing” on the military base. This saved them a couple hundred bucks.
This could be the dumbest decision I’ve ever heard, and we’re including Ben Affleck making Gigli, Rod Blagojevich ignoring wire taps, and the Blazers drafting Sam Bowie over Michael Jordan.
It’s short-term smart, long-term stupid. It’s the tail wagging the dog. Even if you save a few thousand bucks, your marriage will have complex, life-altering, wide-ranging consequences for the next 70 years. Never get married (or stay single) on the basis of taxes. That’s like deciding whether you should get a kidney transplant based on whether the hospital has good parking.
All that said...yes, the marriage will have consequences on your taxes. Do you have questions? Fire away.
[You] Does getting married mean I pay lower taxes or higher taxes?
Oh, come on. Give it to me straight.
I know, you hate that answer. But it really does depend. Generally speaking, there are more financial advantages to being married than single. You can pool health insurance. You split groceries. You share the cost of rent or mortgages—
--No shit. But I’m asking about taxes.
How about slowing down on the caffeine, okay? We’re getting there. The root of the issue is something called the Marriage Penalty.
Sounds familiar. What is it exactly?
Two things. 1) It’s an inevitable consequence of our tax system. 2) Marriage is your penalty for loving this woman. But we’ll focus on the first issue. Let’s say you make exactly $80,000.
Work with me here. Let’s say you make $80k. And let’s say your fiancée also makes $80k. Since we have a progressive tax code—
Remind me what that is again?
Progressive just means that the more you make, the higher percentage you pay. (As opposed to a flat tax rate.) So, if you each make $80k, you’ll each be paying a lower tax rate than you would at a combined $160k. Hence the term “Marriage Penalty.”
That sucks. So it’s better to file individually?
Hold up. Obviously, this issue has generated some political heat over the years, and lawmakers have gone back and forth on reforming the tax code. To some extent they have. It’s complicated and it varies from state-to-state, but essentially they’ve enacted “marriage penalty relief” that, for most income levels, mitigates this penalty.
So should we file jointly or separately?
Just making sure you’re paying attention. It depends on your income range, but now, usually, you’ll probably save money by filing jointly.
“Usually.” When wouldn’t we?
If one person has a bunch of deductions—write-offs, medical expenses, etc.—it might make more sense to file individually. And there are a few other exceptions. To repeat: this is in the minority of cases. It gets very technical very fast, and it changes all the time, so check out what the geeks at TurboTax have to say here.
For much, much more detail on why it’s (usually) better to file jointly—tax breaks, incentives, earned income credit, IRA considerations, etc.—look here.
Does this change my withholding status at work?
You’re damn right it does. As an accountant puts it in the Tax Info Blog:
The Form W-4 you give to your employer gives you three statuses--single, married, or "married, but withhold at the higher single rate.
Believe it or not, options 1 and 3 will get you to the same place. The middle choice ("married") is only appropriate if there is one breadwinner in the family.
Many people get confused by this. If both spouses work and choose "married" (which seems intuitive), they will benefit from the broader married tax brackets twice. I've never once successfully explained this to a client, so just take my word on it. Check either "single" or "married, but withhold at the higher single rate..." if you both work.”
We’re experts on male-wedding-planning (yes, it hurts to look in the mirror and say that); we’re not experts on the tax code. These are the basics. But before you actually file, hit up your geek-accountant-friend or, at the very least, use the aforementioned TurboTax.
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