People generally look at marriage as beneficial to your tax situation and sometimes that is true. But in the case of higher income individuals, what is known as the marriage penalty can come into play. Our tax brackets are set up so that the more income you earn, the higher your tax rate is. A single tax filer enters the 15% tax bracket when he earns $8,925, whereas a married couple filing jointly (MFJ) enters the 15% bracket at twice that – $17,850. Similarly, a single individual enters the next bracket – 25% tax rate –at $36,250 of income and MFJ would do so at $72,500. The penalty is seen for those couples that are in the 28% bracket and higher. A single individual would start paying taxes at 28% when he earns $87,850 of income but MFJ would enter that bracket at $146,400. This is the first bracket where the MFJ limit is less than twice the limit seen from a single filer. This means that the married couple will reach that limit with less money than if they were to file single.
So while you are thinking about floral arrangements and honeymoon destinations, be sure to think about your withholdings as well! They may need to be adjusted for the change in tax status. Even if you are getting married later in the year, your tax status would be considered married for the entire year so no time after January 1st would be too soon.
This is a guest post from Emily Fishwick of Numerico, PC. Visit www.numerico.com if you’d like more information about their accounting practice.
