The One Thing You Need To Know About Getting Married
As a person who has been married for all of two entire weeks, I think we can all agree that I'm an official expert on all things marimonial. I mean, I've figured out how to return housewares purchased by well-meaning but confused relatives (I'm 33, don't you think I probably already own a blender?) and I have mastered how to reply to the question "So, when are you going to get pregnant?" without ripping out anyone's spine, Mortal Kombat-style — how much else could there be to learn? But in the weeks leading up to my marriage, a few of my married friends made off-hand comments about the part of marriage that they were least prepared for — and it wasn't, as I had anticipated, the cold, creeping terror of realizing that one of you is going to die first (it also wasn't a sudden uptick in weird sexual requests). Instead, my friends were surprised that, no matter how you run your finances, the way you file taxes changes as soon as you get married.
I did know that married people seemed to file taxes differently from single people — but much like information about how to make creme brulee or start a fire using only a magnifying glass and a cardboard toilet paper tube, I had filed it away under "maybe learn about that later." But later is apparently now. Because as soon as you get married, the government starts to consider you and your spouse a single financial unit. They don't care how you two personally divvy up the takeout bill — when it comes to taxes, you're treated as if you combine all income.
So how do married people file taxes? And why do they have to file them differently than unmarried people? Here's what you need to know.
How Your Tax Bracket Changes When You Get Married
For starters, married people have the option of filing taxes jointly (combining all your financial information, and filing your taxes as a single unit) or separately (filing them the same way you did when you weren't married). The government is very, very eager for married people to file taxes jointly — choosing to doing so makes it easier to deduct a bunch of stuff and unlock all sorts of other next-level tax goodies. But what if those deduction benefits don't apply to you, or you don't care about them, and simply value keeping your finances separate enough that you're willing to pass over a few deductions this year?
That's the boat I was in — my husband and I keep completely separate finances; we don't even have accounts at the same bank. Why would we file our taxes together? This is when I learned that tax brackets are different for married people, and even if you file separately, you'll be subject to higher married-person-specific tax brackets. If you check out the IRS's tax bracket info for 2015, you'll see that, after you earn a certain amount of money, it takes less income for married people to be knocked to the next tax bracket than single people, even if they file separately.
Ugh, I know, are you eyes glazing over yet? I mean, mine are, and I'm writing this! But if you're ever planning on getting married, it's important to know — especially if, say, you're recently married, eating yogurt for three meals a day because you somehow still spent too much money on your "no-frills wedding," and recently realized that your entire retirement plan is just the words "make an app that's liek Tinder but diffrnt" scrawled on a cocktail napkin. So, please, stay with me.
But What Does Being In A "Higher Tax Bracket" Actually Mean?
Marriage changes taxes most for people who are paying more than 25 percent of their income to taxes. If you're single, you'd have to earn more than $90,750 to enter the next tax bracket, and start paying 28 percent of your income to taxes.
But if you're married, you only need a combined income of $151,201 to be bumped up and pay 28 percent — a combined income that breaks down to $75,601 per person. $75,601 is also the income point at which married people filing separately get bumped up to the next tax bracket, even though they're filing separately. $75,601 is still a lot of money to be earning each year, but it's also $15,000 less than $90,750 — meaning that if two members of couple both earn $76,000 a year, they're being taxed way harder than their single friends who earn the same. This phenomenon is known as the "marriage penalty."
So, basically, filing separately doesn't show your financial independence from your spouse to the IRS, who still will tax you as if you are a single unit. In fact, according to TurboTax, the top reason that you would file their taxes separately once you're married would be to "protect yourself from inaccurate tax information reported by your spouse...[or because] your refund cannot be seized to pay off your spouse's debts." Uh, yikes.
Conversely, couples where one partner doesn't work pay lower taxes as a unit than they would if both partners were unmarried and filed on their own — this is known as the "marriage bonus." If you've heard about families with kids and two working parents talk about why one of them quitting their job to stay home "makes more sense" than continuing to have two incomes, the "marriage penalty/bonus" system is partially responsible.
Of course, issues that kick in after you start earning $75,000 a year should probably be filed under "nice problems to have" (and, in the interest of full disclosure, not a problem I currently experience). But couples with low combined incomes also suffer from the "marriage penalty" — combined incomes may make married couples ineligible for the Earned Income Tax Credit, which they each would have qualified for had they remained unmarried.
None of this is too mind-blowing, of course. But as someone whose relationship happiness is probably at least partially based on the fact that my husband and I never see each other's bank balances, I was surprised to find out that the IRS had other ideas about how married people should behave, and that I was subject to them now. I thought I had found the perfect way to get the practical benefits of marriage — health insurance, end-of-life decision-making rights, etc — while neatly side-stepping anyone else's ideas regarding how we should actually be running our marital lives. I thought I had hacked society's marital expectations completely! But I was wrong. It still shows up in the damndest places — like my accountant's office.
Images: Scott Webb/ Unsplash; Giphy