I'm trying to navigate the maze of health insurance and marriage because my fiance is starting his own business. A while back, Living Almost Large suggested on my least romantic Valentine's Day post ever that I run the numbers on married filing jointly, and that being married might not cost us that much money.
I made this cool chart of tax liability for us if we were single or married. I made a lot of boring assumptions about the 401(k) and the SEP-IRA. They are reasonable--about 15% of income--and they are consistent, as to compare apples to apples. Most importantly, this chart leaves out the truly terrifying self-employment taxes. But those would be the same whether we were married or not.
The chart shows no matter what we're paying a lot of taxes, but I found it really interesting. The more money he makes, the money being married costs us...
8 comments:
Why are you so sure you're Fiancee will clear so much profit asap? Along with business writeoffs. Trust me there is a marriage penalty for making money but if he makes $20k, you come out way ahead of a $250k + $20k taxes versus $250k and $100k, but hey you are making $100k versus $20k.
Also the Single is $49k, but the married filing joint is $56k! That is $28k/each rather than $49k. And if he makes $70k you pay $57k but together only $70k which is $35k each.
Trust me as marrieds making a huge discrepancy, we do better married than single. And has commented.
As a married couple making 6 figures we pay 5% federal income taxes. Hmm...DH makes 85%, I make 15% of income....I wonder why he's so low? Could it be that I make so little?
He'll be profitable just with the products he has already sold but hasn't made yet, so a month or two max. He also will have three months of his day job, which did make money.
This chart was fascinating to me because it showed me that it helps a lot to be married when one makes a lot more than the other (or maybe if we both made less?). But if we both make a lot, it's better to be single. Who knew?
Oh and the chart is apples to apples. The "single" numbers are our single amounts added together.
You have to keep in mind that your tax tables do adjust when you are married. It is much easier to end up in the 25-28% bracket single than married. Sure both of you are going to make money and the IRS will take more if you got it. Don't put off marriage because of the taxes, it doesn't make sense to me.
The "marriage penalty" was originally a "marriage benefit" since the tax codes were set up a long time ago when the man earned 80% or more of the total household income. They just haven't adapted as well to our current socio-economic conditions. Two people with similar incomes are often better off (income tax wise, though not estate tax wise or elsewise) not married.
This is why people stay at home with kids with discrepancies in income. BUT can't if they both say make $50k = $100k combined versus $80k and $20k jobs.
It's not just the joint income but percentage that person brings home
We eloped and got married at city hall. No regrets. together 16 years...
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