Another Tax Question

[DangerMouse]

I have been immersed in tax planning trying to ensure I can minimise what we pay. I have been using the calculators at HR Block.

We have always done Married Flying Joint. However doing this leaves us with a $5k bill for AMT this year. What surprised me is if we both file as Single we actually pay $6k less in Federal Tax this year and there is no AMT payable by either of us. Does this seem right?

Also I have heard reference to there being changes made to AMT before the end of the year. What is the likelihood of this happening and when would it happen?

 

[VaCollector]

Married Flying Joint.

 

[REWahoo]

We have always done Married Flying Joint.

I think what DangerMouse intended to say is they have always flown United.

 

[Martha]

Actually, there are a few circumstances where married filing separately will save you on AMT. Remember though that married filing separately is not the same as single. Generally, married filing separately is a bad idea.

 

[DangerMouse]

I have now realised I screwed up my calculations. If we were able to file as Single we would save $6k, but because we are foolish enough to be married if we do Married Filing Single the situation is as bad.

This does peeve me, why should we pay more than two singles who are shacked up?

We have been discussing the idea of moving out of So. Cal as the rents and taxs are ridiculous. Between the two items that is $45k a year. We figure we could move to Hawaii and telecommute, come to San Diego once a month and be a lot happier and no worse off financially.

 

[donheff]

This does peeve me, why should we pay more than two singles who are shacked up?

Ask any gay couple who would love to get the myriad benefits of marriage.

 

[RetireeRobert]

I have now realised I screwed up my calculations. If we were able to file as Single we would save $6k, but because we are foolish enough to be married if we do Married Filing Single the situation is as bad.

This does peeve me, why should we pay more than two singles who are shacked up?

We have been discussing the idea of moving out of So. Cal as the rents and taxs are ridiculous. Between the two items that is $45k a year. We figure we could move to Hawaii and telecommute, come to San Diego once a month and be a lot happier and no worse off financially.

The correct term is "married filing separately" (not "married filing single").

They call this the marriage penalty. Where true singles file as single, even though they may have shacked up together for years as "unmarried" man and wife, and pay less total tax than a couple legally married, but with otherwise identical income and deductions.

Write your congressman.

 

[clifp]

Interesting I thought Congress eliminated the marriage penalty.
Is it just under AMT that you'd owe more money or would you owe more under the regular tax system as married couple than as two single people?

 

[youbet]

Ask any gay couple who would love to get the myriad benefits of marriage.

Yeah.....but......

In some situations gays are lobbying to have the option of filing their taxes as singles while being married as gays and receiving the so-called privileges of marriage. In Wisconsin, for example, legislation was proposed that would allow gay marriages in the state but each member of the couple would be allowed to file his/her state income taxes as either single (not married filing single, but single) or married status, whichever is to their financial advantage. Hmmmm........ Have your cake and eat it too......

BTW, I am 100% for gay marriage. But, with my version of the rules, married gays would be subject to the marriage penalty just like hetero's.

 

[youbet]

Interesting I thought Congress eliminated the marriage penalty.

Nope.

It depends on the income of each member of the couple and is worst where the two incomes are equal. For example, generally a couple where each member makes $50k will pay will pay more than two singles each making $50k.

 

[cute fuzzy bunny]

Singles have a higher amt trigger level than 1/2 of the married filing single/jointly level.

At least they did the last time I was single.

Hold on, I'll ask my wife...

 

[clifp]

Nope.

It depends on the income of each member of the couple and is worst where the two incomes are equal. For example, generally a couple where each member makes $50k will pay will pay more than two singles each making $50k.

It used to be this way but..

According to this calculator a single person making 50K with the standard deduction owes $7586 a married couple filing jointly making $100K owes $15173.

Thus the marriage penalty is exactly $1..
At $150K the marriage penalty is 325
at 60K the marriage penalty is $1

For a more typical case with one person making 65K and another making 35K the married couple pays $219 less in taxes than 2 people living in sin

As I said Congress did a pretty good job eliminating the marriage penalty. Now of course they haven't done crap about fixing AMT hence the problem.

 

[DangerMouse]

Yeah as CFB says it's not a level playing field when it comes to the AMT trigger. We get done in on AMT to the tune of $5k. It doesn't make any sense that whatever it is for a single person that it is not double for a married couple.

Do you think there is any chance that Congress will do something to fix the AMT issue before the end of the year or are we doomed?

 

[Martha]

I think Congress will do a temporary fix and raise the exemption level. Much as was done last year.

 

[figner]

The marriage penalty was reduced a while back but can still be significant in the higher income brackets. An unmarried couple I know earns in the 28% bracket, however if married they would be in the 33% bracket and pay about $2000 extra in taxes each year according to the calculator clifp posted.

Another related "penalty" is the deductible-IRA and Roth IRA contribution limits. The income limit for contributing to a Roth for a married couple is only about 1.5x that of a single earner.

 

[haha]

This does peeve me, why should we pay more than two singles who are shacked up?

Right. Not only are they having more sex, at least according to surveys, but they are paying less for it.

Of course married folks have a more complete commitment.

Ha

 

[youbet]

According to this calculator

Thanks for posting the calculator. Useful tool.

I used to calculate our taxes both ways until seeing that we'd pay several thousand less as two singles became too annoying to me, so I stopped. Glad to see that the problem has been reduced substantially.

Now, they just need to go finish the job!

 

[mathjak107]

only time for us filing married seperatley was better was when we hit the amt tax. since the amt has limitations on income before every thing is phased out and your on a flat rate at that point being married is not a factor as its a flat rate. since my wife sold some property we were hit with the amt however by filing seperatley it kept my income from being hit with it too .

 

[DangerMouse]

Right. Not only are they having more sex, at least according to surveys, but they are paying less for it.

Of course married folks have a more complete commitment.

Ha

Yeah, why is that? I remember the good old days of being single with fond memories. Now it seems as if we are too tired for anything.

I am hoping that as Martha mentions that Congress will do their thing before the end of the year. I did run our 2007 figures thru the 2006 calculator and that resulted in us not paying any AMT and our tax liability came out at about $4k less than this year.

 

[Martha]

I am hoping that as Martha mentions that Congress will do their thing before the end of the year. I did run our 2007 figures thru the 2006 calculator and that resulted in us not paying any AMT and our tax liability came out at about $4k less than this year.

Congress is saying, pinky swear, we will get a patch done before year end. Pinky swear: Tax writers tell IRS they'll fix AMT - Oct. 31, 2007

 

[Nords]

Right. Not only are they having more sex, at least according to surveys, but they are paying less for it.

They also claim that they're fully contributing to their 401(k) matches and their IRAs, that they religiously save at least 10% of their after-tax income, that they plan to fully retire in their 40s, and that they brush & floss daily...