Title Getting Married & Your Taxes
I went to a friend's wedding recently and was thinking about the tax consequences of marriage. Only a CPA would think about taxes on a sunny Saturday while going to a wedding. But getting married changes your tax situation, sometimes drastically.
Many years ago two friends of mine decided to get married. They decided on a New Year's Eve wedding and planned on getting married at 11:45 PM. They were both clients so I pulled out their tax returns and did a little math. I suggested that they postpone their wedding for a half-hour and save $4,000 in taxes, enough to pay for their wedding. They decided to get married the next year, at 12:01.
Why did this happen? They both had about the same substantial income. They had both gotten a package to leave their jobs and would be earning a lot less the next year. They would have jumped into a higher tax bracket in the first year filing as a married couple rather than as two singles.
This is called the marriage penalty. Congress keeps vacillating between a marriage penalty and a singles penalty. Currently there is a marriage penalty and every year congress talks about changing it. Who knows what they will do next?
The rule of thumb is that if two people's incomes are about equal, they will probably pay a higher tax as a married couple. If their incomes are significantly different, they pay more in taxes as singles. Other things, like kids, medical expenses and home ownership can effect this calculation.
You do not get the alternative of filing as a single individual If you are married.
Call me the anti-romantic CPA.