The Marriage Penalty
Although President Obama promises taxes will be lower for 95% of taxpayers, a question I get from time to time is, “Can I save taxes by getting a divorce and just living together?”
Many two-income family taxpayers pay more taxes as a married couple than they would by filing separate tax returns as single individuals. That’s called the marriage penalty.
The answer is you might save a little bit on taxes, but how much will a divorce cost you, both in terms of dollars and the good will of your spouse?
First, Congress has eliminated the marriage penalty for married couples making less than $132,000 and roughly equal incomes.
If a married couple earns $150,000, with equal incomes and a standard deduction, the marriage penalty is $500.
If they earn $200,000 under the same circumstances, they will pay a marriage penalty of about $787.
And there are other financial benefits to staying married, including inheritance taxes, insurance and Social Security, that you would lose if you got a divorce. Finally, if you divorce in one year and remarry in the next, the IRS may disregard the divorce and require you to file as married anyway.
Source: Post by Sue Shellenbarger
Tags: Divorce, insurance, IRS, marriage penalty, President Obama, Social Security, Taxes
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March 2nd, 2009 at 4:10 am
Hi,
There’s no question that the marriage penalty pains many dual-earner couples. Although Congress has taken steps to reduce it, many middle- and upper-income married couples still pay more than they would if each partner filed separately as a single person.
November 22nd, 2009 at 11:50 pm
I’ve been included in taxations for lengthier then I care to admit, both on the individual side (all my employed life history!!) and from a legal viewpoint since satisfying the bar and pursuing tax law. I’ve put up a lot of advice and redressed a lot of wrongs, and I must say that what you’ve put up makes utter sense. Please persist in the good work – the more people know the better they’ll be armed to comprehend with the tax man, and that’s what it’s all about.