What is a marriage tax?
The marriage tax is defined as the taxes paid when the couple files the income tax returns jointly versus the taxes paid when the couple files the income tax returns separately. The marriage tax has some opportunities to save additional money. The single person in the couple earns or both the couple work but the earning difference is very high. But marriage tax has the negative effect on the couple earning equally where they may end up paying more taxes than the others.
Benefits of filing jointly:
- When taxes are filed jointly tax benefits are higher.
- The IRA contribution can be made in the name of spouse too. So the contribution limit will be high.
- As the income earned has high difference between the couples then the income tax will be lower.
- The income tax credits will be added when income tax returns are filed jointly.
Consequences of filing separately:
- The standard deductions are lower.
- If filed separately the spouse can be disqualified from several tax deductions.
- Limited IRA contribution deduction.
- The capital loss deduction limit is low when filed separately.
The components included in the marriage tax calculator:
- Salary+business income: The income earned as salary and any income from the business.
- Interest+dividends income: The income in the form of interest and dividends.
- Rental, royalty, passive income: The other income earned in the form of rental, passive income
- Short-term capital gain: The amount gained on the short-term sold assets.
- Long-term capital gain: The amount gained on the long-term sold assets.
- Qualified dividends: The tax applied to the capital gain.
- Plan saving: The saving made on the plans like 401(k), IRA etc.
- File status: The taxpayer status like single, head of the house.
- Number of young/other dependents: The number of young and other dependents in the house on the taxpayer.
- Deductions: The deductions from the income. Like mortgage interest, student loan etc.
- State & local tax rate: The payable tax rate of state and local.
- Self-employed: yes or no.
This marriage tax calculator helps to estimate the impact of filing the joint income tax returns as a married couple.