If you’re on a company’s payroll, you’re classified as an employee. In this case, you pay your payroll taxes through the withholding process, which requires your employer to deduct the taxes from your paychecks. As a married individual, whether you pay more or less payroll tax depends on a number of factors, including the type of tax, your filing status and number of allowances.
Marriage Tax Benefits: Lower Tax Bracket Means Lower Taxes
Married people can file their tax return as either married filing jointly or married filing separately. In the former case, the IRS views you and your spouse as one entity. You and your spouse pool all your earnings and deductions and pay taxes based on the married rates, which usually results in less tax. Married filing separately is similar to filing as single; the IRS takes many of the married incentives off the table, such as dependent and child care credits, which generally results in higher tax. In some cases, you can benefit from filing separately, such as if your unreimbursed medical expenses are considerable. Specifically, for the 2017 tax year, unreimbursed medical expenses must exceed 10 percent of adjusted gross income, while such expenses must exceed only 7.5 percent for the 2018 tax year. If you file separately, the deduction is based on only one spouse’s earnings, which might make it easier to meet the requirement.
Claiming taxable marital status on a paycheck as married puts you in a lower tax bracket than claiming single status, and the more allowances you claim, the less federal income tax you pay. For example, if you have children and claim them as dependents on your Form W-4, this increases your allowances and results in less tax than if you had no children or other dependents. Note that you and your spouse cannot claim the same dependents on your W-4 forms. Many states use a withholding system that is similar to federal income tax, in which the same concept applies to state – and, possibly local – income tax withholding. Social Security and Medicare taxes are withheld at flat percentages of your pay; being married has no bearing on whether you and your spouse pay more or less withholding taxes.
While federal payroll tax withholding requirements are standard, state payroll tax withholding requirements vary by state. The Internal Revenue Service mandates that your employer withhold federal income tax from your paychecks; the amount depends on the filing status and allowances you claim on your W-4 form and the agency’s tax-withholding tables. Under the Federal Insurance Contributions Act, your employer must also deduct Social Security and Medicare taxes from your paychecks. Most states require state income tax withholding and a few local governments require local income tax withholding.
Exceptions to the Marriage Tax Break
As a married individual, you can check “Married, but withhold at higher Single rate” in Box 3 of your W-4. This puts you in a higher tax bracket, because your employer calculates the withholding as though you’re single. This scenario is ideal if claiming married results in insufficient tax being withheld from your paychecks, which can happen if both you and your spouse work. Completing the Two Earners/Multiple Jobs section on page two of the W-4 can help you to avoid having too little tax withheld.
If a married person earns the same amount of wages and claims the same number of allowances as a single individual, the married person pays fewer taxes, provided she claims married on her W-4 rather than married, but withhold at higher single rate. However, federal income tax withholding is also dependent on earnings; therefore, if a single person earns less than a married person, she might pay fewer taxes. Use the IRS withholding calculator to help you to complete your W-4 so you don’t overpay or underpay federal income tax.
Married Filing Jointly: Tax Brackets for the 2018 Tax Year
The tax law was overhauled in 2017 to alter the previous tax brackets. For the 2018 tax year, for which tax returns are filed in 2019, married couples filing jointly will be taxed at the following percentages:
- 10 percent of taxable income up to $19,050;
- 12 percent of taxable income between $19,050 and $77,400;
- 22 percent of taxable income between $77,400 and $165,000;
- 24 percent of taxable income between $165,000 and $315,000;
- 32 percent of taxable income between $315,000 and $400,000;
- 35 percent of taxable income between $400,000 and $600,000; and
- 37 percent of taxable income over $600,000.
For example, if you and your spouse together make $200,000 in taxable income in 2018, you will be taxed 10 percent of the first $19,050, which is $1,905; plus 12 percent of the next $58,350 (the amount between $19,050 and $77,400), which is $7,002; plus 22 percent of the next $87,600 (the amount between $77,400 and $165,000), which is $19,272; and 24 percent of the remaining $35,000 (the rest of the income up to $200,000), which is $8,400, for a total of $36,579 in tax.
Married Filing Jointly: Tax Brackets for the 2017 Tax Year
For the 2017 tax year, for which tax returns are filed in 2018, married couples filing jointly will be taxed at the following percentages:
- 10 percent of taxable income up to $18,650;
- 15 percent of taxable income between $18,650 and $75,900;
- 25 percent of taxable income between $75,900 and $153,100;
- 28 percent of taxable income between $153,100 and $233,350;
- 33 percent of taxable income between $233,350 and $416,700;
- 35 percent of taxable income between $416,711 and $470,000; and
- 39.6 percent of taxable income over $470,000.
Following the prior example, if you and your spouse together made $200,000 in taxable income in 2017, you will be taxed 10 percent of the first $18,650, which is $1,865; plus 15 percent of the next $57,250 (the amount between $19,050 and $77,400), which is $8,587.50; plus 25 percent of the next $77,200 (the amount between $75,900 and $153,100), which is $19,300; and 28 percent of the remaining $46,900 (the rest of the income up to $200,000), which is $13,132, for a total of $42,884.50 in tax.