I won't pretend to understand the complicated tax issues that surround a new marriage penalty for high-earning couples. However, I was curious to learn more about it by using a "marriage bonus and penalty calculator" after reading a recent Forbes article.
No matter what the calculator revealed, I knew the results would affect my view of marriage or deter me from earning as much as I can.
Receiving a penalty or a bonus
According to the Tax Policy Center calculator, a couple pays a "marriage penalty" if each person pays more income tax when they file as a married couple than they would have paid if they filed as two single individuals.
My husband and I usually receive a "marriage bonus," because we pay less income tax by filing together than we would as single individuals. However, that could change if we became a higher-earning couple that made more than $250,000, according to the article.
Trying out the calculator
Although I don't typically earn as much as my husband, I tried out the calculator to see how we would be affected if we were each able to raise our income levels to $100,000 each. It's an unlikely scenario, but I don't want a tax penalty to kill our ambitions. According to the calculator, if we each made $100,000, we would pay a marriage penalty of $879. The calculation would change if we took itemized deductions such as mortgage interest, charitable contributions, medical expenses and other deductions. Also, I didn't include dependent children in my calculation.
Fixing the marriage penalty problem
I was bothered to find out that we would receive a marriage penalty even if we didn't hit the magic $250,000 combined income level. The issue of the marriage penalty imposed by the IRS has been debated for years. According to a 1999 Valparaiso University Law Review article, "Fixing the 'Marriage Penalty' Problem" by Robert S. McIntyre and Michael J. McIntrye, few middle and upper-income couples get divorced or fail to get married to avoid the "tax bite." However, the tax code appears to have some affect on the decision to get married. One MSNMoney article, "7 tax reasons not to get married," says high-income couples get slammed with an especially high marriage penalty.
Ultimately, my husband and I didn't consider the tax implications when we got married. And, we won't consider the tax implications of staying married. Instead, we will continue to earn as much as we can without worrying about how much we owe the IRS. We are just grateful to have the opportunity to earn a living, especially after the Great Recession. Even if we had to pay a marriage penalty to the IRS, we would still receive financial benefits of being married including medical benefits. If we end up making "too much," it's a problem we can live with.
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