Tax Breaks for Single People Vs. Married People

by Kathy Zheng

    Congress has devised the tax code in a way that provides different rates for married joint filers and single people. As a result of much controversy, in 2010, the government modified tax rates to eliminate the so-called "marriage penalty." However, taxes could still go up for married couples depending on their tax bracket. Tax breaks for single and married people depend very much on the particular situation of the couple.

    Single people do not have special deductions but instead have much more flexibility than a joint filer has. For example, you can change your retirement account to a Roth IRA. This is a type of retirement account where you pay the after taxes today but is tax free on the investment income when you withdrawal at a later time. Also, if you are single and still have education debt, your parents can pay off the loan and you can claim a tax deduction on the interest.

    As a joint filer, your two incomes will be higher than an individual income. As a result, your tax bracket will be higher. To ease this burden, in 2003 Congress passed the Jobs and Growth Tax Relief Reconciliation Act. Under this law, the first $14,000 of income has only a 10 percent tax rate. The rest of the tax brackets are reduced by 2 percentage points for whichever tax bracket you fall in.

    The marriage penalty is mostly a myth and 51 percent of married couples pay less than if they were filing jointly, with an average savings of $1,300. The reason is that if two people with very different incomes marry, the tax breaks and deductions outweigh the greater income bracket. The real marriage penalty is for those who are poor. If each person makes $10,000 or less than their taxes will actually go up after marriage.

    The IRS considers a marriage that occurs at any time in the year. If you are planning your wedding around the beginning or end of the year, it might make sense to check the tax consequences of such an action. For example, if your marriage is in December but you will face a marriage penalty, you may want to move the date into January to delay the penalty another year.

    About the Author

    Kathy Zheng is a personal financial planner. She holds a Bachelor of Arts in economics and is certified as a level 1 financial adviser.

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