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Although controversial, the Tax Reduction and Reduction Act, or TCJA, has served its purpose of simplifying parts of the tax code, including the so-called "marriage penalty", which left similar income a higher income tax than they would be. would have if they had not said "I do."
However, the new rules have not totally eliminated the connubial cost. In fact, the marriage penalty is well in effect in the newly amended tax code – but only if you are among the richest.
Source of the image: Getty Images.
How has the marriage penalty changed – and will it affect you?
Under the old tax code, married couples whose personal income was similar would end up paying more taxes than they deposited it separately. For example, if both persons earned $ 150,000 a year, they would each be $ 41,616.25 if they deposited separately, for a total of $ 83,232.50. But at the joint deposit, the total amount of the tax would rise to $ 87,039.00 – a difference of $ 3,806.50.
Under the TCJA, personal income tax has been significantly simplified. A look at the The 2018 tax brackets of the IRS indicate that the taxable income amounts of common filers align perfectly with those of singles: each installment is simply doubled. For example, if you and your spouse earn $ 150,000 this year, you will have the same marginal tax rate of 24% as if you were single.
Here is a look at the hooks.
| Rate | Income range, single taxfilers | Income range, joint depositors |
|---|---|---|
| ten% | $ 0 to $ 9,525 | $ 0 to $ 19,050 |
| 12% | $ 9,526 – $ 38,700 | $ 19,051 – $ 77,400 |
| 22% | $ 38,701 – $ 82,500 | $ 77,401 – $ 165,000 |
| 24% | $ 82,501 – $ 157,500 | $ 165,001 – $ 315,000 |
| 32% | $ 157,501 – $ 200,000 | $ 315,001 – $ 400,000 |
| 35% | $ 200,000 to $ 500,000 | $ 400,001 – $ 600,000 |
| 37% | More than $ 500,000 | More than $ 600,000 |
Data source: IRS.
These last two parentheses become a little hinky, however. You will find that the joint depositors' income threshold ceases to follow the simple pattern of doubling the rate set at the top of the table, which means that single depositors have a little more leeway to earn higher income while paying taxes at the lower rate of 35%.
So, if you earned $ 500,000 this year and you file it yourself, you owe the federal government $ 150,689.50, which is $ 45,689.50, plus 35% of the amount exceeding $ 200,000. If you and your non-fiance partner earn each one as much, you would collectively pay $ 301,379 to Uncle Sam.
But if you and your spouse earn $ 500,000 and file jointly, your total taxable income would be $ 1 million, well above the $ 600,000 threshold for the 37% rate. You owe $ 309,379, which means that the marriage penalty will cost you $ 8,000 more.
Another problem: detailed deductions
Most of us do not win at these extraordinary levels, so we do not have to worry about the marriage penalty imposed by the income tax. But the new code contains a final hitch for those who are harnessed, even if they have an average income.
The TCJA limits personal deductions detailed for national and local taxes to a total of $ 10,000 per taxpayer per year – whether you file a return alone or jointly. So if you're married, you're giving up an additional $ 10,000 deduction you could have made if you kept things separate.
If the new marriage sentence Is At least you know that your money helps the government generate revenue and other tax deductions from the capital tax. Of course, this may or may not bring comfort to you when you pay.
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