marriage tax penalties

[PokerGuy]

Wow. What a screwed up tax system.

I'm sure a 200,000 page new tax reform package that needs to be passed so we can know what's in it can fix it

That is indeed screwed up, thanks Eagle for the education.

 

[Wreckem]

Reread the entire table. Furthermore, look up at example #3 of qualifying person under Head of Household.

Example 3—girlfriend. Your girlfriend lived with you all year. Even though she may be your qualifying relative if the gross income and support tests (explained later) are met, she is not your qualifying person for head of household purposes because she is not related to you in the one of the ways listed under Relatives who do not have to live with you. See Table 4.

Anyone can be a dependent, and yes you may be able to claim(depending on tax year) your gf and her gaggle of bastard children as dependents, if they meet the tests for dependents, but they have to be related to you for qualify you to qualify for HoH.

 

[dank69]

Wow. What a screwed up tax system.

I'm sure a 200,000 page new tax reform package that needs to be passed so we can know what's in it can fix it

That is indeed screwed up, thanks Eagle for the education.

Yeah, people should be forced to get married if they want to live together. :thumbsup:
EDIT: Oops, except for the gays. Almost forgot the gays.

 

[nehalem256]

Yeah, people should be forced to get married if they want to live together. :thumbsup:

Right because if you don't have a special tax filing status you can't live together

 

[PokerGuy]

Yeah, people should be forced to get married if they want to live together. :thumbsup:

Nobody is forcing anyone to get married to live together. You are free to live together with anyone you want. Fail as usual.

 

[dank69]

Right because if you don't have a special tax filing status you can't live together

Right because two people living together but not married don't deserve the same tax credits that married people get.

 

[EagleKeeper]

Reread the entire table. Furthermore, look up at example #3 of qualifying person under Head of Household.

Example 3—girlfriend. Your girlfriend lived with you all year. Even though she may be your qualifying relative if the gross income and support tests (explained later) are met, she is not your qualifying person for head of household purposes because she is not related to you in the one of the ways listed under Relatives who do not have to live with you. See Table 4.

Anyone can be a dependent, and yes you may be able to claim your gf and her gaggle of bastard children as dependents, if they meet the tests for dependents, but they have to be related to you for qualify you to qualify for HoH.

Table 4 has a "disclaimer" in terms of the definition which points to Table 5.

 

[nehalem256]

Right because two people living together but not married don't deserve the same tax credits that married people get.

Correct.

Marriage implies both responsibilities and privileges. You want people to have the privileges without the responsibilities. Typical liberal.

 

[nehalem256]

Table 4 has a "disclaimer" in terms of the definition which points to Table 5.

 

[Wreckem]

Table 4 has a "disclaimer" in terms of the definition which points to Table 5.

I seriously hope you aren't a Tax CPA....

I.R.C. § 2(b)(3)(B)(i)

Limitations.--Notwithstanding paragraph (1), for purposes of this subtitle a taxpayer shall not be considered to be a head of a household--
(A) if at any time during the taxable year he is a nonresident alien; or
(B) by reason of an individual who would not be a dependent for the taxable year but for--
(i) subparagraph (H) of section 152(d)(2), or
(ii) paragraph (3) of section 152(d).

Section 152(d)(2)(H)

(H) An individual (other than an individual who at any time during the taxable year was the spouse, determined without regard to section 7703, of the taxpayer) who, for the taxable year of the taxpayer, has the same principal place of abode as the taxpayer and is a member of the taxpayer's household.

I can post more of the actual law if you want...

 

[werepossum]

There should be no advantage for either group. You want to be married and raise a family, it's your choice, you should plan & pay for it. You shouldn't get "help" from the government.

Shouldn't that be the conservative opinion?

This - although arguably government has a vested interest in promoting marriage as an institution that stabilizes society. But I think two married individuals should have exactly the same deductions and tax liability as two single people of the same income. Government's function should not be deciding how much money one needs.

 

[spidey07]

This - although arguably government has a vested interest in promoting marriage as an institution that stabilizes society. But I think two married individuals should have exactly the same deductions and tax liability as two single people of the same income. Government's function should not be deciding how much money one needs.

Thanks to Obama, all of the marriage penalties are back. Not just on income rates, but on deductions and phase out as well.

May great fuck be upon him for destroying the family.

 

[Fern]

-snip-
Here are my discussion questions:

1. Do you believe the marriage tax penalty is really about balancing the interests of singles who are penalized by not being married with the couples who do benefit from being married?

This is rather complicated.

The marriage penalty can reward singles who do not marry (both working). It can penalize singles who do not marry (only one works).

It can reward married couples (only one works). It can penalize married couples (both work).

I do not know what the original motivation was for creating the marriage penalty. The answer to such questions (motivation or reasoning behind change in tax law) is typically stated in the "Blue Book" published by the Joint Committee of Taxation. I do not have access to that info, it's too far back.

However, I wouldn't be surprised if revenue raising desires are the real motivation. And I'm just guessing here - it might be that the average women's wage was 60% of a man's in the 1960's. So, realizing that doubling the bracket was, in effect, nothing but a 'give-away', even for a working couple (and a real give-away for the stay-at-home mom type families) they decided to pare it back to 1.6. At that time it could have been seen as 'fairness' measure too.

2. Do you believe the system is fair overall, or would it be more equal if the married limits were simply set to 2x the limits of single filers?

Women's wages/income have certainly advanced. I recently read that among young workers women are actually now earning more than men. If true, a move to 2.0 would seem appropriate/fair.

Ideally, to remove tax as motivation or 'demotivation' for marriage we could go back to having everyone file their own tax return. I.e., no joint/separate filing. But I don't see that happening. There are now too many 'welfare' type payments/credits in our tax returns and you'd end up giving tax breaks (e.g., refundable credits) to individuals married to a wealthy partner. And complexity would be a problem too. E.g., splitting up mortgage interest and R/E taxes on a jointly owned home. Our present information reporting system (e.g., 1099's) isn't capable of dealing with this.

3. For those of you who are married, did the tax implications of being legally married factor into your decision to get legally married? Do you think the way the system is setup now either encourages or discourages marriage?

No, it didn't affect my decision to get married.

Anytime we have a marriage penalty, or 2.0 bracket someone is going to be motivated to take advantage of it or to avoid it if a penalty. Living together while remaining unmarried no longer carries any social stigma so I think some will consider the various economic and other benefits and downsides before actually getting married.

Fern

 

[spidey07]

So why are all Obama polices and tax law structured at 200 for single and 250 for married? That's a huge marriage penalty that the fucker signed into law.

Obamas goal is destruction of family.

 

[Jhhnn]

Thanks to Obama, all of the marriage penalties are back. Not just on income rates, but on deductions and phase out as well.

May great fuck be upon him for destroying the family.

How so, one of great Obama hate?

Explain how repealing the Bush tax cuts for filers making over $250K accomplishes that, if you will.

It's obvious how Repubs killing their tax hostages by forcing expiration of the whole Bush tax cut package might accomplish that...

 

[Jhhnn]

So why are all Obama polices and tax law structured at 200 for single and 250 for married? That's a huge marriage penalty that the fucker signed into law.

Obamas goal is destruction of family.

So make it 125/250. Happy now?

 

[Jhhnn]

Anytime we have a marriage penalty, or 2.0 bracket someone is going to be motivated to take advantage of it or to avoid it if a penalty. Living together while remaining unmarried no longer carries any social stigma so I think some will consider the various economic and other benefits and downsides before actually getting married.

Marriage conveys additional advantages not enjoyed by couples merely living together, like coverage by group employer sponsored health insurance. It also conveys many legal rights & responsibilities. If my wife, for example, somehow lapsed into a vegetative state, I would have the responsibility of making decisions on her behalf. If we were merely living together, that would fall to her family. If she signs a contract, it's my contract too. If I receive an inheritance, it's also hers by law. So forth & so on.

 

[shira]

By "marriage tax penalty", I mean the following:

Look at the current 2012 tax brackets:

http://www.forbes.com/sites/moneybuilder/2011/09/30/2012-federal-income-tax-brackets-irs-tax-rates/

For the 10 and 15% tax brackets, the limit for married filing jointly is exactly twice that of the single rate. For the 25%, 28%, 33%, and 35% brackets the limits for married filing jointly are 1.7x, 1.2x, 1x, and 1x the limits for the single rate, respectively.

Additionally, the standard deduction for a married couple is currently double that of the single rate. According to this link, it used to be only 1.7x the single amount (prior to the 2001/2003 Bush tax cuts):

http://www.smartmoney.com/taxes/income/how-the-expiring-bush-tax-cuts-affect-you/

The above link also outlines several other ways in which married couples could be penalized vs. singles with respect to taxes.

Why was the tax policy setup like this in the first place? I did some searching and came across this link:

http://www.ncpa.org/pub/ba445

It claims that prior to 1948, married couples filed separate tax returns. In 1948, Congress passed a law that originally set the married filing jointly tax bracket limits at 2x the limits for singles. This was later amended in 1969 to make the married filiing jointly limits and standard deductions 1.6x the limits for singles.

In effect, they were apparently trying to strike a balance between couples who saw a tax benefit by getting married and singles who saw a tax penalty by not being married. The article above outlines two hypothetical situations that illustrate this point.

The Bush tax cuts of 2001 and 2003 partially relaxed these limits, as the smartmoney link above explains.

Here are my discussion questions:

1. Do you believe the marriage tax penalty is really about balancing the interests of singles who are penalized by not being married with the couples who do benefit from being married?

2. Do you believe the system is fair overall, or would it be more equal if the married limits were simply set to 2x the limits of single filers?

3. For those of you who are married, did the tax implications of being legally married factor into your decision to get legally married? Do you think the way the system is setup now either encourages or discourages marriage?

I am single so I would be curious to know what the married ATPN members think about this.

For a one-earner family, there's a significant tax ADVANTAGE in being married. Compare the federal income tax on $100,000 AGI for a single person and a married couple, assuming no itemized deductions. The tax is about $5000 less (as I recall) for the couple.

Now, for two singles making $50,000 each, there's clearly a penalty if these singles marry each other (as I recall, taxes are about $2500 higher for the couple).

Don't quote me on the tax differences, but I know they're in the ballpark.

This might be a holdover from the days when the husband worked and the woman was a homemaker. One solution is to just double all the brackets for married couples; that will completely eliminate the penalty (and for one-earner families, or for two-earner families where one income is much greater than the other, there will still be an advantage).