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Technically I think your question makes a link between two things that don't necessarily have anything to do with each other. Most people don't get married -- or stay single -- because of tax status. It's not a consideration.
So if the question is: "why WOULD people get married and file jointly, as opposed to staying single and filing as HOH, and single IF it would cost them more money to do that because they'd be paying higher taxes?" The answer is the tax filing status is not an issue for them.
I haven't done the math...IS it for a fact true the same couple would make out better each staying single and filing separately, vs. filing married jointly?
I know that years ago some elderly people who otherwise might have wanted to marry , stayed single and lived together, because it would have affected their Soc. Sec. checks. But I think that "penalty" has been done a way with. But that was dealing with SS benefits.
As for taxes: supposedly the 'marriage penalty' was done away with that made a difference between marrieds filing joint vs. separately.
I'm not married but I know my brother's tax person has don't the math both ways for him and his wife -- married filing joint -- and filing separately -- and he always gets more back filing jointly. That doesn't sound like the 'marriage penalty' was eliminated to me.
But not being married it doesn't affect me so I don't think about it that much.
Why do people get married instead of one filing head of household and the other single. Seems like you pay less income tax at HOH?
You mean you'd pay less income tax with one filing HOH and the other single, but actually, it varies depending on the relative incomes of the couple.
Also, being married gives a couple a number of legal benefits which you don't have when unmarried (as the entire discussion over gay marriage has made clear). Some of the legal benefits are estate and gift tax benefits, although with the lifetime exemption amount north of $5million per person that's unlikely to result in additional estate or gift tax to most people.
When I've compared the tax rates,you actaully pay more as head of household than married filing jointly.
But to be fair,that's only if the other partner isn't working,as in my case my partner isn't working,but I can't "claim" him either.
Depends. It's referred to as the marriage tax penalty usually, there's a lot of material on it. Historically it's because in community property states men and women could each claim half of the husband's income and file individually. With the US tax code being progressive, two $25,000 piles of money pay less than one $50,000. Thus if you lived in a community property state, "income splitting" was a great way to reduce your tax liability. Hence you had the family unit tax "married filing jointly." The income brackets are widest for married filing jointly, then head of household, then single. You also have other legal incentives to marriage. You can take your spouses pension and/or social security but not some random person you produced offspring with, although there's the common-law marriage states. It doesn't do it perfectly, however. Hence you have the marriage penalty. Generally for higher income people it's cheaper to not marry and there's not much difference or it's even cheaper to file married for lower-income people. Also depends on income split. The advantage also changes from year to year as Congress plays with the income brackets. Back in 2000 there was much, much more incentive to not get married. Fewer brackets, 15% straight to 28%.
Obviously, you need offspring (or a dependent parent) to claim head of household. That introduces a whole layer of murkiness since the system is really designed for married households. But yes, I know several people that never married because of the tax liability. They remained single (tax bracket's are much more generous for two single people than one married couple) and then whichever one earned the most money claimed the children each year once they had kids.
So have they or have they not eliminated the "marriage penalty?" Wasn't that some big thing lawmakers were patting themselves on the back for a few years ago?
Head of Hold status is simple.
Single or divorced taxpayer claiming children, is head of household.
There is one income, no spouse, claiming minor children as exemptions is
Head of Household.
So many men would file Head of Household, claiming wife as exemption, but
as soon as the relationship under exemptions were stated as wife, it is a joint
tax return.
Very simple.
Both spouses are responsible for the tax liability. They are joint.
The marriage penalty still lives.
So have they or have they not eliminated the "marriage penalty?" Wasn't that some big thing lawmakers were patting themselves on the back for a few years ago?
Never heard of that. And no, they haven't. They reduced it by a fair amount during both the Clinton era (more tax brackets; mostly beneficial to the working/middle-class) and Bush era (lower tax brackets at the higher end; mostly beneficial to the well-to-do). Basically, our tax code was made less progressive which reduced the advantage of counting two smaller piles of money instead of one larger one. Unless there's children involved, you have to have two pretty high incomes to make it beneficial. And it has to be amicable. Generally the woman gets the kids and head of household filing status regardless of tax implications.
Technically I think your question makes a link between two things that don't necessarily have anything to do with each other. Most people don't get married -- or stay single -- because of tax status. It's not a consideration.
I just want to inject some humor here regarding people doing funny things to avoid tax/liability...
Well our situation is probably not unique, but not very common. We are a same-sex couple expecting our first child next year. We are not married, but now that DOMA has been for the most part repealed, we were thinking about getting married next year. One problem is that our home state doesn't recognize it, so it won't be a 100% win for us. My GF will adopt the child so there won't be any legal issues with that.
I work in Finance so numbers are always on my mind. I ran my income for next year, filing HOH with the child and my tax liability goes from about $12K to about $7K for the year. Big difference. My GF doesn't make much, so her tax liability isn't great to begin with. I haven't plugged our numbers into a calculator just yet, but I have a feeling with our income split, we might come out on top not getting married for a while.
We are both 31 and do want to get married, but are tackling some debt right now where a lower tax liability would make more sense. Also, since our state does not approve, I feel that there is no rush to get married right now. Obviously it's a risk. I know it may all sound kind of weird the way I'm talking about this, but over the years we've had to come up with non-traditional ways of dealing with things and I feel that, for me anyways, the whole marriage thing has been grayed. Hearing people say such nasty things makes you not want to have anything to do with it, however, we do intend on getting the legal document since it offers lots of protections. At this point, I just wish they called it something else and granted the unions the same protections under the law. But that's for another thread.
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