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.