Should I get Married for Tax Purposes?

In this video, the advisors discuss why the U.S. tax code strongly favors married couples over single individuals when it comes to tax liabilities. They provide an analysis based on a hypothetical married couple with one spouse earning $300,000 and the other earning $100,000, totaling a combined income of $400,000.

When they run the numbers for filing jointly, they highlight that the couple’s taxable income is reduced to $374,100, resulting in a lower tax rate of 32%. The advisors emphasize that the U.S. tax system is progressive, meaning that only the income above certain thresholds is taxed at higher rates.

In contrast, if the same income earners remain single and file separately, they would face higher tax rates, with the higher earner entering the 35% tax bracket. This results in an estimated federal tax of $89,000 for two single filers, compared to $80,000 for a married couple filing jointly, leading to a significant tax savings of nearly $9,000 for the married couple.

They also note that this difference becomes even more substantial as income levels increase, with seven-figure income earners potentially saving tens of thousands of dollars in taxes by choosing to marry and file jointly.

The video serves as an educational overview of how the U.S. tax system incentivizes marriage from a tax perspective, without making specific recommendations about individuals’ relationship choices.

Video Transcript

In today’s video, we’re going to talk about why the US. Tax code strongly favors couples getting married versus staying single. Why do married couples pay, on a dollar for dollar basis, less than single couples that are, you know, let’s say a couple, two spouses with equivalent income that are not married, that are filing on a single tax status basis versus the same income earners that are married filing jointly.

So Ben is going to talk us through a rather substantial difference in the taxes that one would pay if married versus single. Ben, walk us through the analysis. So we ran the analysis with both spouses getting married and filing jointly.

Spouse one’s income is 300,000. Spouse, two’s income is 100,000. Again, for simplicity’s sake, we’re just going to assume their AGI is 400. They’re going to take the standard deduction, and their taxable income would be 374,100.

If you go over to our 2022 tax tables, again, 374,000, that leaves us in the 32% tax bracket. We just need to be aware that our United States tax system is progressive. So only the income that is above that $340,100 number is going to be taxed at that 32% rate.

The rest is going to be taxed at 10%, 12%, 22%, and so forth. So estimated federal tax for filing jointly is a little over $80,000. If they were to not get married and just file as single filers, the spouse with $300,000 of income after the standard deduction would be at 287.

And again, really where we’re seeing this make a large impact is, from a single filing standpoint, $287,000. That puts you in the 35% tax bracket. So that’s in a tax bracket we entirely avoided if we were filing jointly, the estimated.

Federal tax from that $300,000, spouse would be 74,000 and spouse two at $100,000 of income, their estimated federal tax would be a little over 14,000. So total federal tax if both spouses filed jointly would be about 80,000.

And the total federal tax paid if they stayed single and filed single would be 89,000. So almost a $9,000 tax savings by getting married and filing jointly. Ben, thanks for providing such a detailed analysis.

We found that this difference between married filing jointly versus two a couple that are filing both single, the bigger the income, the bigger the difference. So, for example, if there’s a million dollar income earner and $100,000 income earner, the $100,000 income earner is going to get penalized slightly, but the million dollar income earner is going to get a huge raise in tax savings from having those tax brackets expanded versus the single status.

So we’ve seen differences upwards of 30, 40, even $50,000 for a seven figure income earner if they’re married versus single. So this video is not a recommendation whether to stay single or get married if you’re a couple.

Rather just an educational view on why the US. Tax code favors you from a tax standpoint if you’re married versus single.

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