Marriage and Taxes Essay

Marriage and Taxes Introduction: Bill and Mary plan to marry in December of 2012. Bill’s salary is $32,000 and he owns a residence. His itemized deductions total $12,000. Mary’s salary is $39,000. Her itemized deductions total only $1,600 as she does not own a residence. Assume that 2013 tax rates, exemptions, and standard deductions are the same as 2012. Task(s): Answer the following questions: a. What will their tax be if they marry before year-end and file a joint return? The file joint of returns will be $12,000. b. What will their combined taxes be for the year if they delay the marriage until 2013? The combined taxes will be $13,600 if they delay the marriage. $12,000 + 1,600 = 13,600. c. What factors contribute to the difference in taxes? Some of the factors that can result a difference in the taxes would be based on your itemized deductions. Examples a itemized deductions are mortgages that you own, have done any charitable donations, medical expenses, Long-term care services, and relocating for new employment. For a marriage case they can us the marriage penalty, Examples of a marriage penalty: (1) Both of the earns $80,000 a year mas two single individuals, the marginal tax rate will be 25% However, if you are a married couple, the marginal tax rate on a $160,000 annual income is 28%. 2) If you are married you are allowed to write off a total of $3,000 in losses, if filing separately, each only has a $1,500 limit; whereas two single individuals can write off a total of $6,000. (3) When it comes to IRA contributions, they are phased out at income levels between $178,000 – $188,000 for married couples versus a range of $112,000 – $127,000 for single taxpayers. Ingenuity. Empathetic.