Playing the Marriage Tax
Mutual Funds (08/00) Vol. 6, No. 10 p.82; Bennett, Andrea

Although taxes are usually the furthest thing from people's minds when they are getting married, it could pay off to take the time to think about them when planning the date of the wedding. Saying your vows before the stroke of midnight on Dec. 31 could mean a much larger bill from Uncle Sam. No matter what month you get married, the Internal Revenue Service considers the marriage to have existed for the entire 12 months of the year. Take Jane and Bill, for example. Jane's salary this year is $70,000 after deductions, while Bill's salary is $30,000. If they remain unmarried, their combined tax bill would be $21,369. Married, they make $100,000, and their tax bill increases immediately by $931, to $22,300. The bracket creep is the problem. With a higher income comes a higher tax bracket, so joining together two separate incomes boosts the income up drastically, creating what is known as the "marriage penalty." Getting married is a good idea, however, if, for example, one spouse makes significantly more than the other, such as when one spouse volunteers and brings home no paycheck. This can create a significant tax break. Marrying someone who has significant capital losses may also be a good idea if you have significant taxable capital gains.


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