The marriage sentence in the United States refers to the higher taxes required of some married couples with both partners earning an income that would not be required by two single people identical to the exact same income. There is also a wedding bonus applicable in other cases. Several factors are involved, but in general, in the current US system, single-income couples typically benefit from filing as married couples (similar to so-called income-sharing), while couples with double earning often punished. The percentage of affected couples varies from year to year, depending on the shift in tax rates.
Video Marriage penalty
The rate of progressive taxation combined with revenue sharing
The US tax code fixes different income levels to shift from one marginal tax rate to another, depending on whether the archiving is done as a single person or as a married couple. For lower incomes, the transition point for married couples is doubled for single people, which benefits married couples if their income is quite different. This is equivalent to "revenue sharing", which means that the tax payable is the same as if both people use the schedule for single people, but each represents half of the total income. At higher incomes, this equality is lost but there is still an advantage if the two earnings are quite different. To make an extreme example, if a person has $ 466,950 of taxable income in 2016 (with a deductible amount more than double of the standard deduction) and the other obtaining nothing, the tax payable by the breadwinner as one would be $ 466,950 * 0.396- $ 43,830.05 or $ 141,082.15, while together they would pay $ 466,950 * 0,396- $ 54,333.70 or $ 130,578.50, a $ 10,503.65 savings.
If both people earn the same income, then at the bottom end of the tax schedule there is no difference between filing as single and filing as a married couple (ignoring the question of withholding, see below). But at the higher end of the tax schedule, there is a penalty for married couples whose earnings are similar, compared to what they will pay for as single people.
For example, the chart below shows US federal tax rates for 2013:
Below this tax rate, two people each earn $ 87,850 each file as "Sole" and each will pay a marginal tax rate of 25%. However, if two people are equally married, their combined income will be exactly the same as before (2 * $ 87,850 = $ 175,700), but the "Married collectively" tax brackets will push them to a higher marginal rate of 28%, their cost additional $ 879 in tax.
In the most extreme cases, two people who each earn $ 400,000 each will pay a marginal tax rate of 35%; but if the same two persons were proposing as "Married, filing jointly" then their combined income would be exactly the same (2 * $ 400,000 = $ 800,000), but $ 350,000 of that income would be taxed because the rate of 39.6% higher, resulting in a $ 32,119 fine marriage in additional taxes ($ 16,100 for 39.6% brackets only, plus the rest is due to higher phase of lower brackets.) Using the formula for income 2016, if both people have a taxable income X greater than $ 415,050 then as single, each will pay 0.396X- $ 43830.05, whereas if they marry, together they will pay 2 (0.396X) - $ 54333,70, so they lose 2 ( $ 43830.05) - $ 54333,70 or $ 33,326.40.
In some couples, larger earners can benefit from filing as married, while the lower earners are not married. For example, consider two single people, one with a $ 100,000 income (and therefore pay a marginal rate of 28%) and others without income (and therefore pay no income tax). By marrying and filing jointly, the $ 100,000 producer reduced his bracket to a 25% rate, received a "marriage bonus" for a net tax savings of $ 364, while non-students went from a 10% bracket to a 25% bracket on the first dollar earned upon entering working world.
It can be shown that it is mathematically impossible for a tax system to have all (a) increased marginal tax rates with income, (b) joint submissions with revenue sharing for married couples, and (c) a combination of tax bills unaffected by marital status of two persons.
Maps Marriage penalty
Reductions
The US tax code allows taxpayers to claim reductions (such as charitable donations, credit interest, or state tax payments) on their earnings. Taxpayers can choose automatic default deductions or others can choose to itemize their deductions. Two single persons applying for separate returns each can opt for a reduction policy that benefits them more, but a married couple proposing a single return will be forced to use the same method. For example, if one person has no significant deductions, that person can take a standard deduction ($ 6,100 per 2013). Different people, who have, say, $ 10,000 in charitable donations, would be better off breaking down deductions because the standard deduction is $ 6,100 (single, tax year 2013).
If two people are allowed to file a separate tax return, each can claim their most profitable reduction policy, and their combined total deduction will be $ 16,100 ($ 6,100 $ 10,000). However, if the two persons are combined on one "Married, filling together" tax return, they will be forced to choose their deduction sequence (combined $ 10,000) or use standard deductions ($ 6,100 per person or $ 12,200 combined). Either way, a married couple will receive a reduction of less than two single people identical to the exact same income.
On the other hand, getting married can generate less taxes. If one person gets twice the amount of standard deduction and personal exemption (so he earns about $ 20,000 per year) and the other earns anything, the wage earner will pay about 5% of his total income as taxes as one, but as a couple taxable income they will be zero so they will not pay taxes.
Social Security/Medicare and subsidy burden for the sole breadwinners and parents who do not work
With regard to other taxation issues in the United States, one concern is that this marriage subsidizes single-parent breadwinner/parent partners in Social Security and Medicare benefits. For example, in social security and Medicare, couples with two incomes pay taxes that create surpluses or at least pay for their own benefits (and receive reduced benefits such as reducing survivors benefits), while one spouse pays an inadequate tax that creates deficits and receive additional benefits, not financed by 50% or more in Social Security (ie, total 150% or more), and 100% or more in Medicare (i.e. 200% or more).
This problem is exacerbated by the fact that Social Security and Medicare taxes are collected only on wage income, passive income such as capital and property revenues are exempt, and benefits are progressive. This means that the main tax burden for the program is run by two subsistence families with wages ranging from the middle class and family and family also receive fewer benefits than other family structures or arrangements.
Proposals for "raising bounds" will continue to place additional burdens on the 2-seek families where each partner has received revenues (not capital gains or other property-based income that is exempt from tax).
The Affordable Care Act adds taxes on passive income and capital gains to support Medicare but it is not known whether this is enough to prevent the heavy burden faced by two subsistence families in subsidizing the sole breadwinner's family and especially the burden faced by the two breadwinners. families with wages between mid-range and hat. No tax has been imposed to support the progressiveness of Social Security benefits.
Relationship with debt reduction government
The Tax Policy Center also sees the current "marriage bonus" for a single breadwinner as the main tax expenditure of Bush's tax cuts and major Federal debt contributor.
The International Monetary Fund has requested the United States, Portugal and France, all countries with significant sovereign debt, to eliminate their practices, including income-sharing, which burden 2-income families with higher taxes on single-income families (both married or not).
Non-US citizens
Marital punishment can be worse in cases where one partner is not a citizen or resident of the United States. Although the couple can not be required by US law to pay US taxes, because US people are still required by law to file taxes on worldwide income, the two options are left. Americans can either file as 'Filing Married Separately' (or 'Head of Household' if they have at least one qualified person who is not their spouse) or try to convince their spouse to voluntarily pay US income tax on their income by applying for a shared refund. The first requires the use of 'Separate Filing Wedding' brackets or 'Household Chairs', which are less useful than 'Married Filing Jointly'. The latter allows the person to use a more profitable Married Filing Jointly tax bracket but requires paying taxes on non-US income, which will not be required for two identical single persons.
See also
- Druker v. Commissioner of Internal Income
- Income splits
- Kiddie Tax
- Share your parents' earning/sharing marriage
- Taxation in the United States
References
External links
- The Motley Fool: Death & amp; Tax: Marriage Penalty
- About.com: Wedding: Wedding Tax Penalty
- Tax Policy Center: Tax Topics: Wedding Penalties (TPC is a joint venture of the Brookings Institute of Urban and Institutions)
Source of the article : Wikipedia
0 Comments