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Marriage penalty hit particulary hard this year!
Old 04-19-2012, 01:29 PM   #1
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Marriage penalty hit particulary hard this year!

Hi,

My wife and I have been together a long time but only married recently. We are currently DINK's and track our finances separately.

My wife has rental property that she is partnered with her Father on. Because the income limitation on taking up to 25K in rental real estate losses against ordinary income is the same if single or married the difference in her portion of total income taxes single vs married is 51% higher because we are married.

And yes I'm detailed enough I ran our taxes 3 times. Both of us single and then the actual married return.

Our tax code is sooo broken.
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Old 04-19-2012, 02:07 PM   #2
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Hey, you can always get divorced to save money...
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Old 04-19-2012, 02:18 PM   #3
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After seeing our tax bill earlier this week I thought about it lol
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Old 04-19-2012, 05:19 PM   #4
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So your combined income is pushing into higher tax brackets? IOW, your joint taxable income is about the same as the sum of your individual taxable income?

if the real estate losses allowed are the same then that isn't the cause of the difference so it must be in the rates?
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Old 04-19-2012, 06:27 PM   #5
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Old 04-19-2012, 06:31 PM   #6
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Quote:
Marriage penalty hit particulary hard this year!
Yeah - It's bad enough that we have to take out the garbage and be nice to her sister. But paying extra taxes on top of that is pushing the limits

Just wait until 2013 when the tax rulezs revert to the old rules. Then you'll really appreciate "The Marriage Penalty"
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Old 04-19-2012, 07:32 PM   #7
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Originally Posted by pb4uski View Post
So your combined income is pushing into higher tax brackets? IOW, your joint taxable income is about the same as the sum of your individual taxable income?

if the real estate losses allowed are the same then that isn't the cause of the difference so it must be in the rates?
The problem is that normally you are not allowed to deduct real estate rental losses against ordinary income. However, there is a modified adjusted gross income limit of $150k. It is 150K if you are single and its $150K if you are married. So my wife would easily be able to deduct these losses if she was single but since we are married she can't deduct the losses. The inability to take that deduction increased her tax bill 51% for the year.

I didn't realize it until responding to this post but I thought that there was no longer a "marriage penalty" on differences in tax brackets but that is only true up to 25% but after that the penalty kicks in again.

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Old 04-19-2012, 07:36 PM   #8
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Quote:
There is no longer a "marriage penalty" on differences in tax brackets and deductions. Here is a chart to show that:

That's not true beginning on January 1. After that there truly will be a marriage penalty unless legislation is passed to keep the present system.
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Old 04-19-2012, 07:53 PM   #9
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That's not true beginning on January 1. After that there truly will be a marriage penalty unless legislation is passed to keep the present system.
You caught me mid edit. I pulled the chart to prove my incorrect statement lol. Looking at the chart you can see that during the upper part of the 25% tax bracket the marriage penalty continues. Below that it is gone.
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Old 04-23-2012, 01:58 AM   #10
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There are also different income brackets for IRA contributions and the AMT. the marriage penalty isn't just the regular income brackets...you'll see it more and more my friend.
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Old 04-23-2012, 05:25 PM   #11
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When my husband proposed and suggested a wedding date of Jan 1, I congratulated him because we'd avoid the marriage penalty for the previous year. He looked at me like I'd grown a second head. He picked the date because he knew he'd never forget when our anniversary is.

It all worked out.
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Old 04-23-2012, 05:41 PM   #12
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Concerning the current news coverage of marriage (or not) for gays and lesbians in various states, I've read several times that some are trying to be "married" for most legal issues but reserve the right to file as singles for Fed tax. Sounds like pretty good strategic thinking to me.......
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