tax questions - marriage penalty?
LisaT Posted: Oct 28, 2002 06:52 PM+
Posted: Oct 28, 2002 06:52 PM
tax questions - marriage penalty?For couples where both are working and making similiar incomes, did you get screwed on taxes filing jointly?
I'm concerned that we're going to owe big time this year. We can off set some of that with investment losses, but I don't think we're entitled to the $6K we would be if we were single.
Also, I just got laid off last week. I'm still getting regular paychecks through 12/31 and I also get a lump sum payment equal to another 4 months salary. So basically, my income this year is going to be 33% more than 'normal' (since 1/3 of what should be next year, I'm getting this year). And that lump sum amount doesn't have 401k contributions taken from it. (the good news is I get paid to not work for the next 6 months).
So far, we've dropped both our with-holding allowances down to 0% and upped my 401K contribution to 15% (for the next 2 months of paychecks) - will that be enough? I don't want to be using our house savings to pay taxes!
Sorry for the ranting, but I'm hoping those of you who have gone through tax filing as a married couple already can advise me.
Sonicstef Posted: Oct 29, 2002 08:50 AM+
Posted: Oct 29, 2002 08:50 AM
Re: tax questions - marriage penalty?Sorry to tell you this but you will get screwed big time this year.
I would suggest you find a good accountant now to see how you can offset.
For one - the marriage penalty really stinks. The govt is phasing it out but it will take several years to come into full effect. When I was single, I could get a nice fat refund but now that we are married - we owe!
Two - I believe (but Im not sure) that you can only take $2K worth of investment losses per year. Maybe that is just for stock losses. Your accountant will know all the details.
Cira Posted: Oct 29, 2002 09:04 AM+
Cira MEMBER SINCE: 8/01 TOTAL POSTS : 3460 WEDDING DATE: Jun 23, 2002
Posted: Oct 29, 2002 09:04 AM
Re: tax questions - marriage penalty?I second Sonicstef's suggestions. Call an accountant.
Another one of our reasons this year to buy a house was to get away from 'paying' taxes. We can write off our closing costs and upfront taxes paid - so we should just break even.
I tell you - this absolutely STINKS!
ddunne23 Posted: Oct 29, 2002 10:04 AM+
Posted: Oct 29, 2002 10:04 AM
Re: tax questions - marriage penalty?So, I'm clueless about all this tax stuff....what exactly is the marriage penalty? We are getting married Dec 29? Should we still file separately to avoid the marriage penalty?
dgtlsunshine Posted: Oct 29, 2002 11:18 AM+
dgtlsunshine MEMBER SINCE: 12/01 TOTAL POSTS : 2838 WEDDING DATE: Jul 07, 2002
Posted: Oct 29, 2002 11:18 AM
Re: tax questions - marriage penalty?Oh can we get more on this one. If we file separately will it be better? We just got married in July and I pray we do not owe. My salary alone I used to get back like 3k or so now with our incomes together we are making more than double my salary. What can we do to avoid owing. We don't have a house so that is not helping us.
Sonicstef Posted: Oct 29, 2002 11:30 AM+
Posted: Oct 29, 2002 11:30 AM
Re: tax questions - marriage penalty?The marriage penalty is essentially this: When you are married, you are no longer 2 seperate individuals with a seperate set deductable (the amount on which you dont pay tax) each. Instead you are considered one entity and the deductable is much lower than what it was when you were single.
In addition, when you combine your incomes, you will probably be in a higher tax bracket causing even more of your $$ to go to Uncle Sam.
Filing seperately does not help since you are still considered married and do not benefit from 2 seperate deductables no matter how you file.
You can determine how much the marriage penatly impacts you on this: http://legislation.cwfa.org/reference/marriage-tax.shtml
The tax structure works great for married couples where only one of the partners work - but how realistic is this anymore?
Sonicstef Posted: Oct 29, 2002 11:31 AM+
Posted: Oct 29, 2002 11:31 AM
Re: tax questions - marriage penalty?Not sure about this either but I believe that you must file as a married couple for the year you are married in....so for those marrying on 12/31 - that ****s for you.
shamma Posted: Oct 29, 2002 01:26 PM+
shamma MEMBER SINCE: 10/01 TOTAL POSTS : 19166 WEDDING DATE: Aug 03, 2002
Posted: Oct 29, 2002 01:26 PM
Re: tax questions - marriage penalty?I am moving to my own darn island
LisaT Posted: Oct 29, 2002 01:29 PM+
Posted: Oct 29, 2002 01:29 PM
Re: tax questions - marriage penalty?Stef - thanks for the calculator. It confirms my fears that we'll be $3-5K higher this year cause of the wedding. Bleh...
as for the stock losses, that may help a little. Individuals can take $3000/year loss, but its lower for married couples. We may only be entitled to $3K together - still investigating that one.
Any accountants on here?
NIHA Posted: Oct 29, 2002 02:46 PM+
NIHA MEMBER SINCE: 1/02 TOTAL POSTS : 3206 WEDDING DATE: Jun 22, 2002
Posted: Oct 29, 2002 02:46 PM
Re: tax questions - marriage penalty?I haven't even looked into this! DH and I did not change anything with our employer, so I think we're still both Single 01. Do we have to file together, or can we continue to file seperately?
LisaT Posted: Oct 29, 2002 02:49 PM+
Posted: Oct 29, 2002 02:49 PM
Re: tax questions - marriage penalty?I think you have to file as married (thats what kills you) - regardless of whether its filing jointly or separately. I'm don't know if there are any advantages one way or the other.
karen32 Posted: Oct 29, 2002 03:29 PM+
Posted: Oct 29, 2002 03:29 PM
Re: tax questions - marriage penalty?Hey Ladies - I'm not a newlywed (less than a year to go), but I am a tax manager with Deloitte & Touche in NYC, so ask away!!!!
As for the capital losses - you are limited to $3,000 combined over your net capital gains.
And yes - the marriage penalty does stink big time!!! Only in very rare circumstances will filing married separately be better than married filing jointly.
Please ask any questions you have. I'll check the post frequently.
LisaT Posted: Oct 29, 2002 03:38 PM+
Posted: Oct 29, 2002 03:38 PM
Re: tax questions - marriage penalty?Karen - glad to have yoo on the thread!
Any suggestions to limit our tax hit? Is contributing more to our 401K the best bet?
karen32 Posted: Oct 29, 2002 03:47 PM+
Posted: Oct 29, 2002 03:47 PM
Re: tax questions - marriage penalty?Hey Ladies -
I'm so glad my CPA-skills are coming in handy here!! There are a couple of ways to reduce your tax bill (pardon me if I ramble on). Basically, you either need to defer income until next year or accelerate some deductions into this year.
1. Increasing your 401K contribution is good. If your job doesn't offer one, consider starting an IRA. Deductions made before 4/15/03 will qualify for a 2002 deduction.
2. Home ownership is probably the best way to reduce your tax burden (not always possible).
3. Consider accelerating certain deductions - your medical has to exceed 7.5% of your AGI. If you're close, try moving some appointments to 2002 - dental, new eyeglasses, contacts, etc.
4. Keep good track of your charitable contributions. People tend to throw money into the church basket every week and never write it down. $5 or $10 a week definitely adds up. If you donate clothes, try to estimate a fair market value. A nice-sized bag worth of clothes is probably worth $50 or so.
5. Keep an eye on your investments. If you see yourself with huge capital gains, look and see if there are any loser-stocks you can dump to offset the gains.
6. If you or DH go to school at night and don't get reimbursed by your employer - that's usually a good deduction - provided you're not going to school for something completely different than your current job. Any sort of training to enhance your current position or better position you for a promotion is a valid deduction.
Umm, that's quite a long post. Sorry about that.
Hope this helps!!
Let me keep thinking!!!
Valenia Posted: Oct 29, 2002 04:13 PM+
Valenia MEMBER SINCE: 4/01 TOTAL POSTS : 2268 WEDDING DATE: Jun 30, 2002
Posted: Oct 29, 2002 04:13 PM
Re: tax questions - marriage penalty?Wow Karen, thanks for all of the great information!!! Don't you dare apologize for a long post that is super helpful!!!
P.S. Can you do my taxes? hehehehe
ddunne23 Posted: Oct 29, 2002 04:16 PM+
Posted: Oct 29, 2002 04:16 PM
Re: tax questions - marriage penalty?Thanks Karen. I am tax-retarded, so pardon my basic questions. I am getting married December 29,2002...do I need to file married in '02 or can I still file single until I change over my legal documents. Or does one have nothing to do with the other?
karen32 Posted: Oct 29, 2002 04:19 PM+
Posted: Oct 29, 2002 04:19 PM
Re: tax questions - marriage penalty?I hope the information is helpful!!
Doreen - you do need to file Married. You could get married at 12/31 at 11:59pm and still have to file married. Your marital status is determined as of the end of the year.
ddunne23 Posted: Oct 29, 2002 04:27 PM+
Posted: Oct 29, 2002 04:27 PM
Re: tax questions - marriage penalty?Bummer for me! So pretty much you get married, two incomes really are one in the eyes of the IRS and you get screwed on the standard deduction. Is that pretty much it?
karen32 Posted: Oct 29, 2002 04:40 PM+
Posted: Oct 29, 2002 04:40 PM
Re: tax questions - marriage penalty?You do get slightly screwed. The standard deduction for single people for 2002 is projected to be $4,550, but the standard deduction for married filing jointly is only $7,600. However, if you file married filing separately, you really get screwed, because then you only get $3,800 each
On a positive note, you now get 2 personal exemptions @ $2,900 each, instead of one. So that's good!
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