I don't get it. I keep getting $0. Maybe I'm not using high enough numbers? I used the example of $100k each, or then $100k and $80k, which is on the high side of the median where I live and the single vs. married end up the same.
Marriage benefit comes into play when couples have disparity in income. If you are both at similar incomes, it won't change much. However, punch in 200k and 50k and see the difference.
It can be also a married person tax depending on your circumstances. If both spouses make similar amounts then they are getting taxed more as a married couple, because the bracket threshold for a married couple are less than 2x that for an individual.
I don't understand why everyone is not taxed as an individual, regardless of marital status.
Taxing as individuals is kind of unfair to single earner households, since the earner has to support more people it seems reasonable to tax them less. You could maybe accomplish a similar thing with deductions but there will still be some weird cases
A couple each home earns x, each gets taxed on x. Each gets the tax free allowance on the fist £12.5k of the annual income. Each gets the full basic rate slice before they hit higher bands etc.
If one of the couple earns 2x and the other zero, then only one can use their tax free allowance and they get one slice of the basic rate band etc.
They still have the same pre-tax income for the same household.
Personally I think people should be allowed to opt in to sharing taxable income.
Why do we need to push people into the workforce? There are a lot of social benefits to people being stay at home parents (which will be the commonest reason for doing so).
What fraud?
> You will then get the argument of "why should I be taxed more because I'm single"?
You might, but its a dishonest argument. You are taxing households together. You are giving each individual the same amount of tax free income and the same amount in the lower bands.
It is already possible for self employed people to do this by making their spouses a partner or shareholder in the business or similar. This is just extending the same rights to employed people.
Why is taxing households together the correct thing, other than the fact it presumably would improve your personal standard of living (it would also improve mine)? What are you trying to encourage? I could see if you want to encourage families having tax benefits based on children - but universal childcare provision seems more likely to succeed.
And as for not seeing how a tax cut based on 2 people living together could not be abused, you must be very short sighted.
As a mostly single earner in a community property state, my spouse earns half the income for tax purposes. If you were going to tax individuals, it's probably reasonable to apply income evenly across marriages for all states.
I supported a non-earning spouse for a decade in Canada and it's always been a bit murky. Like in 2014-2015 there was a concept of transferring up to 50k of income to the spouse ("Family Tax Cut"), but Trudeau's Liberal gov't canceled it when they came into power; I think they correctly recognized that it was basically a handout to families privileged enough to be in a position where there was enough spread between the two earners that transferring that sum would be significant.
CRA is even pretty careful about letting a spouse claim capital gains income; it's always attributed back to whoever earned the original principal (outside of inheritance). I think the only way around this is to formally "loan" the spouse their investment money, but you have to charge them interest and the interest is of course income to you.
Tax policy is also used a method of encourage certain types of behavior and discourage others. EV Tax Credits and Solar Tax Credits are example of encouraging starting up industries which we need to assist with climate change in economic powered method.
At a broad level, offering benefits for marriage solves political problem, married people tend to vote so need to be catered to. It also solves societal one, marriage tends to be better at extremely broad strokes for society. Married Couples live longer, commit less crime, kids in married households generally have better outcomes and so forth. So politicians in United States decided to incentive it.
TIL. All the tax bracket thresholds for married filing jointly are exactly double that of married filing separately, which are the same as single taxpayer, except the threshold for top-most bracket where it switches between 35% and 37%, which is wildly different in favor of single taxpayers. Weird.
What is very strange is that some states let you file jointly to save money on federal income taxes, but file separately for state income taxes and others do not.
The threshold rates for a lot of credits, deductions and exemptions are not. Like the Roth IRA is $153k for single, $242k for married. Child care credits have a similar problem if I remember correctly (or they did before my kids grew out of it).
I did a draft of our taxes this week and it was almost exactly the same amount filing married vs separately. Where is the big benefit for filing jointly? I guess if you claim dependents?
MFS vs MFJ is a whole different thing from MFJ vs 2x Single.
While there's numerous places where MFJ < 2x Single due to various marriage penalties, and even more numerous places where 2x Single < MFJ due to the shared tax bracket space below the 37% bracket....
there are very very few places where MFS > MFJ. They exist, but you have to be in particular situations like one person having disproportionately more debt and on an income based repayment plan, or similar.
There are of course many situations where 2x Single = MFJ = MFS if it's just two similar income W2 employees with no edge cases going on.
(Once you're married, filing 2x Single is obviously not an option)
If one spouse makes significant income and the other does not, it can help drop the high-earner into a lower bracket overall. Not a huge boon, but every penny counts in our household.
If you stay married for at least ten years, and one spouse has a significantly better social security record, the other spouse can claim spousal benefits if your marriage is still in force or they are unmarried.
Depending on circumstances, you might save considerably more in other areas - being covered as a spouse on the other's employer health insurance, reduced car insurance rates, state & local tax savings, ...
Zero comments on this linking to diamond rings? Plug in $100,000 and $0, and it suggests some specific diamond rings of roughly that price. I hope that an affiliate link!
I wonder how many more failed tiny financial band-aids it will take before governments figure out that moving the needle on birth rate requires that deep systemic issues be addressed.
The most astute observation I've seen on the topic is that in a capitalistic system in which monetary value is assigned to everything, the value of children is deeply negative and therefore they are not desirable. By having children, most couples are putting their stability, wellbeing, and long-term prospects on the line. The opportunity cost is staggering. If more children is the desired outcome, that tradeoff must cease to exist, and a lousy $2k isn't anything remotely close to that.
This is such an important point. As a father of two, children are turning out to be a very large investment...larger than anything else I ever will pour money into, probably by an order of magnitude (though not quite, since I have a house).
I talk to lots of people in SV, heads of design, engineers, as well as folks from around the world that I work with, from San Diego to Argentina and Chile. So many 20-30 year-olds have told me they are never having kids. Life is too fun, and they want to see the world. But training the next generation is hard work, and it's easy to do a terrible job. We want to incentivize people to have kids and be great parents. But that requires voluntary sacrifice, which is a hard sell.
If I hadn't had kids, I could retire now. As it is, I'll be lucky to be able to work and get a job so I can earn for the next couple of decades so I have enough to retire.
Very few people understand the depth of what you just said.
$2K or even $20K is meaningless for a parent making $100K or more.
Kids have a negative value to a professional class member.
If you engage in agriculture or some similar activity, a child as old as 10 can be a helping hand in some way or the other. No surprises that Amish farmers have a high birth rate.
It's not clear exactly what the number is, but if one observes individuals who manage to climb out of the low and middle classes and accrue a certain amount of wealth (somewhere in the ballpark of $600k-$1m net worth and up, maybe), pretty consistently not long after that achievement they've settled down and started a family.
I think for many the desire is there, but sufficient de-risking is required for them to be comfortable with acting upon it.
I think there's just not enough money in the county to induce more babies. The cost would be a shock. Anyone wealthy enough to shoulder the cost would fight so hard against it, it would never stand a chance. IMO the number is probably something like $10k per year per kid. Foster Care pays somewhere between 8k-12k.
That would introduce a new problem of all of those seniors suddenly becoming more dependent on their younger family members, which is exacerbated by kids moving all over the country in search of greener pastures.
There's not really a solution that doesn't involve heavy restructuring in one place or another.
What's going to get worse? Currently parents get absolutely shafted by the tax system as the tax credits are next to nothing relative to the amount of time, effort, and capital it takes to raise a child.
Currently the cost of raising children is privatized while the benefits are socialized.
Okay now factor in the probability of divorce, and the amount you get to keep afterwards, and discount it to present value, vs. paying more taxes and keeping it all.
Also remember that you typically lose half of income forever, not just wealth in a divorce.
It is important to understand the consequences of breaking any contract you enter into, including marriage. Luckily, you're not stuck with default terms to that contract, and if you're not comfortable with them pre-nuptual agreements can modify those terms.
I don't get it. I keep getting $0. Maybe I'm not using high enough numbers? I used the example of $100k each, or then $100k and $80k, which is on the high side of the median where I live and the single vs. married end up the same.
You are in the same tax bracket at $80 and $100k, so the amount that you would pay would be identical.
Switching tax brackets is a categorical change which needs to occur before there is a difference.
Marriage benefit comes into play when couples have disparity in income. If you are both at similar incomes, it won't change much. However, punch in 200k and 50k and see the difference.
It can be also a married person tax depending on your circumstances. If both spouses make similar amounts then they are getting taxed more as a married couple, because the bracket threshold for a married couple are less than 2x that for an individual. I don't understand why everyone is not taxed as an individual, regardless of marital status.
Taxing as individuals is kind of unfair to single earner households, since the earner has to support more people it seems reasonable to tax them less. You could maybe accomplish a similar thing with deductions but there will still be some weird cases
We have exactly this problem in the UK.
A couple each home earns x, each gets taxed on x. Each gets the tax free allowance on the fist £12.5k of the annual income. Each gets the full basic rate slice before they hit higher bands etc.
If one of the couple earns 2x and the other zero, then only one can use their tax free allowance and they get one slice of the basic rate band etc.
They still have the same pre-tax income for the same household.
Personally I think people should be allowed to opt in to sharing taxable income.
This discourages people joining the workforce and is open to fraud. You will then get the argument of "why should I be taxed more because I'm single"?
Why do we need to push people into the workforce? There are a lot of social benefits to people being stay at home parents (which will be the commonest reason for doing so).
What fraud?
> You will then get the argument of "why should I be taxed more because I'm single"?
You might, but its a dishonest argument. You are taxing households together. You are giving each individual the same amount of tax free income and the same amount in the lower bands.
It is already possible for self employed people to do this by making their spouses a partner or shareholder in the business or similar. This is just extending the same rights to employed people.
Why is taxing households together the correct thing, other than the fact it presumably would improve your personal standard of living (it would also improve mine)? What are you trying to encourage? I could see if you want to encourage families having tax benefits based on children - but universal childcare provision seems more likely to succeed.
And as for not seeing how a tax cut based on 2 people living together could not be abused, you must be very short sighted.
As a mostly single earner in a community property state, my spouse earns half the income for tax purposes. If you were going to tax individuals, it's probably reasonable to apply income evenly across marriages for all states.
I supported a non-earning spouse for a decade in Canada and it's always been a bit murky. Like in 2014-2015 there was a concept of transferring up to 50k of income to the spouse ("Family Tax Cut"), but Trudeau's Liberal gov't canceled it when they came into power; I think they correctly recognized that it was basically a handout to families privileged enough to be in a position where there was enough spread between the two earners that transferring that sum would be significant.
CRA is even pretty careful about letting a spouse claim capital gains income; it's always attributed back to whoever earned the original principal (outside of inheritance). I think the only way around this is to formally "loan" the spouse their investment money, but you have to charge them interest and the interest is of course income to you.
> I don't understand why everyone is not taxed as an individual, regardless of marital status.
Because married couples form a household and it allows them to share child care and work as they see fit.
If you tax individuals, you're encouraging both to earn the same amount of money.
If you tax couples, it encourages the higher earner to keep working, thus you have a higher overall productivity.
Thus you have freedom and higher overall productivity in favor of shared tax burden.
Tax policy is also used a method of encourage certain types of behavior and discourage others. EV Tax Credits and Solar Tax Credits are example of encouraging starting up industries which we need to assist with climate change in economic powered method.
At a broad level, offering benefits for marriage solves political problem, married people tend to vote so need to be catered to. It also solves societal one, marriage tends to be better at extremely broad strokes for society. Married Couples live longer, commit less crime, kids in married households generally have better outcomes and so forth. So politicians in United States decided to incentive it.
TIL. All the tax bracket thresholds for married filing jointly are exactly double that of married filing separately, which are the same as single taxpayer, except the threshold for top-most bracket where it switches between 35% and 37%, which is wildly different in favor of single taxpayers. Weird.
What is very strange is that some states let you file jointly to save money on federal income taxes, but file separately for state income taxes and others do not.
Taxation is a strange, mixed-up world.
I just checked the Federal rates and they’re pretty much exactly double from single to married.
Are you in a funky state with bad tax policy?
The threshold rates for a lot of credits, deductions and exemptions are not. Like the Roth IRA is $153k for single, $242k for married. Child care credits have a similar problem if I remember correctly (or they did before my kids grew out of it).
I did a draft of our taxes this week and it was almost exactly the same amount filing married vs separately. Where is the big benefit for filing jointly? I guess if you claim dependents?
MFS vs MFJ is a whole different thing from MFJ vs 2x Single.
While there's numerous places where MFJ < 2x Single due to various marriage penalties, and even more numerous places where 2x Single < MFJ due to the shared tax bracket space below the 37% bracket....
there are very very few places where MFS > MFJ. They exist, but you have to be in particular situations like one person having disproportionately more debt and on an income based repayment plan, or similar.
There are of course many situations where 2x Single = MFJ = MFS if it's just two similar income W2 employees with no edge cases going on.
(Once you're married, filing 2x Single is obviously not an option)
If one spouse makes significant income and the other does not, it can help drop the high-earner into a lower bracket overall. Not a huge boon, but every penny counts in our household.
A married couple pays the same income tax as two single payers making half the income.
Due to progressive taxation, we tax two people who make $50,000 less than someone who makes $100,000 which is where the tax savings come from.
if its not more evident that taxes are to benefit whatever it is and not what's important. The complex rules that are based on 0 logic.
Tax works differently by country. In many cases there are no mechanism to pool your taxes with your significant other.
Yep! This post was specific to US federal taxes.
If people find this interesting, I will open-source and allow contributions to support other country's tax systems.
A Federal Tax calculator I made after finding out my tax savings would be $12k if I married my girlfriend.
If you stay married for at least ten years, and one spouse has a significantly better social security record, the other spouse can claim spousal benefits if your marriage is still in force or they are unmarried.
Hard to value that though.
Depending on circumstances, you might save considerably more in other areas - being covered as a spouse on the other's employer health insurance, reduced car insurance rates, state & local tax savings, ...
12k in savings included about 6k in state tax savings because I am in California. Will add in state taxes if people end up using this
If you have to pay NIIT it’s fairly disadvantageous to be married.
If NIIT significantly outweighs the increase in your standard deduction, you probably already have a tax professional for questions.
Zero comments on this linking to diamond rings? Plug in $100,000 and $0, and it suggests some specific diamond rings of roughly that price. I hope that an affiliate link!
Those are not affiliate links.
I just found the idea of the ring being paid for by the IRS funny.
I appreciate this, but now do one for non-traditional, multi-income households.
I’d like solid numbers of how much I’m overpaying to do the work the government refuses to (sheltering folks, ensuring nutritious foodstuffs).
It's about to get even worse: https://www.cbc.ca/news/world/birth-rate-trump-baby-bonus-1....
I wonder how many more failed tiny financial band-aids it will take before governments figure out that moving the needle on birth rate requires that deep systemic issues be addressed.
The most astute observation I've seen on the topic is that in a capitalistic system in which monetary value is assigned to everything, the value of children is deeply negative and therefore they are not desirable. By having children, most couples are putting their stability, wellbeing, and long-term prospects on the line. The opportunity cost is staggering. If more children is the desired outcome, that tradeoff must cease to exist, and a lousy $2k isn't anything remotely close to that.
This is such an important point. As a father of two, children are turning out to be a very large investment...larger than anything else I ever will pour money into, probably by an order of magnitude (though not quite, since I have a house).
I talk to lots of people in SV, heads of design, engineers, as well as folks from around the world that I work with, from San Diego to Argentina and Chile. So many 20-30 year-olds have told me they are never having kids. Life is too fun, and they want to see the world. But training the next generation is hard work, and it's easy to do a terrible job. We want to incentivize people to have kids and be great parents. But that requires voluntary sacrifice, which is a hard sell.
If I hadn't had kids, I could retire now. As it is, I'll be lucky to be able to work and get a job so I can earn for the next couple of decades so I have enough to retire.
Very few people understand the depth of what you just said.
$2K or even $20K is meaningless for a parent making $100K or more.
Kids have a negative value to a professional class member.
If you engage in agriculture or some similar activity, a child as old as 10 can be a helping hand in some way or the other. No surprises that Amish farmers have a high birth rate.
https://ashishb.net/parenting/pregnancy/
It's not clear exactly what the number is, but if one observes individuals who manage to climb out of the low and middle classes and accrue a certain amount of wealth (somewhere in the ballpark of $600k-$1m net worth and up, maybe), pretty consistently not long after that achievement they've settled down and started a family.
I think for many the desire is there, but sufficient de-risking is required for them to be comfortable with acting upon it.
I think there's just not enough money in the county to induce more babies. The cost would be a shock. Anyone wealthy enough to shoulder the cost would fight so hard against it, it would never stand a chance. IMO the number is probably something like $10k per year per kid. Foster Care pays somewhere between 8k-12k.
Get rid of old age benefits and the value will become positive.
That would introduce a new problem of all of those seniors suddenly becoming more dependent on their younger family members, which is exacerbated by kids moving all over the country in search of greener pastures.
There's not really a solution that doesn't involve heavy restructuring in one place or another.
Seems about as likely to materialize as every other handout this administration has promised.
How's everyone enjoying their tariff rebate checks? Any servicemembers care to share how they spent their warrior dividend?
What's going to get worse? Currently parents get absolutely shafted by the tax system as the tax credits are next to nothing relative to the amount of time, effort, and capital it takes to raise a child.
Currently the cost of raising children is privatized while the benefits are socialized.
Okay now factor in the probability of divorce, and the amount you get to keep afterwards, and discount it to present value, vs. paying more taxes and keeping it all. Also remember that you typically lose half of income forever, not just wealth in a divorce.
It is important to understand the consequences of breaking any contract you enter into, including marriage. Luckily, you're not stuck with default terms to that contract, and if you're not comfortable with them pre-nuptual agreements can modify those terms.
Not sure why this is being downvoted. It should be a very real consideration at least in the US.
The best thing I have done in my life was get married and have kids. And money has nothing to do with that happiness.