Marriage Tax Penalty

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bigdan

bigdan

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All -

Do any of you have ideas on how to - legally - soften the blow of the marriage tax penalty?

Wife is also a physician. This is our first full tax year of two attending income. When we run the taxes through as "filing single", we owe about $2K each. When we run the numbers as "married" (either separately or joint file), we owe >$40k. WTF.

I've already made sure they take all the money that they should.

What else can I do? What am I missing?
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bigdan said:
All -

Do any of you have ideas on how to - legally - soften the blow of the marriage tax penalty?

Wife is also a physician. This is our first full tax year of two attending income. When we run the taxes through as "filing single", we owe about $2K each. When we run the numbers as "married" (either separately or joint file), we owe >$40k. WTF.

I've already made sure they take all the money that they should.

What else can I do? What am I missing?
Click to expand...

I don't think you are missing much of anything. Marriage tax penalty tends to hit hardest for couples that earn nearly equivalent incomes and have combined income in the $250K-$500K range. Why? Because the 2nd person essentially gets all their income taxed at very high marginal rates instead of when you are single a lot of it is at a far lower rate.
 
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No words of wisdom but I am in the same boat and it sucks.

We both file as 0, single. We each withhold about 25k extra/year on top of that (federal only).

Trying to look on the bright side, it should soften the blow if/when my wife goes to part time since everything she is earning is taxed at 51% combined federal/state and all of that extra income pushes us into AMT.
 
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bigdan said:
All -

Do any of you have ideas on how to - legally - soften the blow of the marriage tax penalty?

Wife is also a physician. This is our first full tax year of two attending income. When we run the taxes through as "filing single", we owe about $2K each. When we run the numbers as "married" (either separately or joint file), we owe >$40k. WTF.

I've already made sure they take all the money that they should.

What else can I do? What am I missing?
Click to expand...
This year, set your W-4's to zero exemptions, married filing single. Even then, you may still have to pay extra 10K or so, in 2018. Not only that, but you are in AMT territory, meaning that you can't deduct a lot of things either. ;)

This is progressive taxation, affirmative action for the poor, aka socialism. The way I tend to educate my spouse about it is that everything she does is taxed at almost the highest rate, so there is little gain in both of us working full time.

Another solution is to divorce for tax purposes. It's not illegal afaik, and it's pretty safe if you have kids.

P.S. You ain't seen your tax penalties yet (for those 40K).
 
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Thanks for the quick replies. I've been debating going to "the guy" that some of my friends use - "always" finds a way to get a refund. But a $40k turn around without lying seems unlikely.

I jokingly told my wife we could divorce to save money, and she said: "Not a bad idea - that's almost $400,000 we'd save over 10 years.". :thinking:
 
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bigdan said:
Thanks for the quick replies. I've been debating going to "the guy" that some of my friends use - "always" finds a way to get a refund. But a $40k turn around without lying seems unlikely.

I jokingly told my wife we could divorce to save money, and she said: "Not a bad idea - that's almost $400,000 we'd save over 10 years.". :thinking:
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She's a keeper.

Seriously, I wouldn't go there, unless you have 2+ kids together. People go through rough patches in life, and that piece of paper is the glue that keeps the relationship running.

I am an immigrant, and the way I look at it is that I owe it to this country, so it doesn't bother me that much. But you are not, so look for a good accountant.
 
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Had a similar situation this year, we use an accountant who showed us we were filing everything wrong. Saved us far more than his cost. Won't be doing our taxes alone anymore.
 
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AdmiralChz said:
Had a similar situation this year, we use an accountant who showed us we were filing everything wrong. Saved us far more than his cost. Won't be doing our taxes alone anymore.
Click to expand...

Unless you're spouse is a CPA it's just worth it to do your own taxes at the attending level. Way too much on the line. We bitch about people trying to be their own doctor then turn around and try to be our own CPA's. Plus, the their fee is deductible so it's pretty cheap given the piece of mind.
 
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I am in the same boat and luckily have discussed it with my fiancé and we are in 100% agreement to not file any paperwork. Definitely a keeper.
 
I thought you could elect to be "married filing separately" no? My wife is a stay at home mom so it's never been an issue for me.

Maybe I should start listing my wife as an employee and write off all the money she spends??
 
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"Married filing separately" has the least favorable tax brackets. Anything over $235k puts you in the highest tax rate.
 
GassmanMD said:
"Married filing separately" has the least favorable tax brackets. Anything over $235k puts you in the highest tax rate.
Click to expand...

But wouldn't that still be potentially better than having essentially every penny of your spouse's income taxed at the highest bracket??
 
If she only made $50 grand or so it probably would not be worth it for her to work, but she doesn't. All her income pays for additional savings, retirement, mortgage pay downs, one time large expenses, etc. while still living a pretty comfortable lifestyle in an expensive area.
She's worth millions. And she has a great ...
;)

--
Il Destriero
 
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IlDestriero said:
If she only made $50 grand or so it probably would not be worth it for her to work, but she doesn't. All her income pays for additional savings, retirement, mortgage pay downs, one time large expenses, etc. while still living a pretty comfortable lifestyle in an expensive area.
She's worth millions. And she has a great ...
;)

--
Il Destriero
Click to expand...

A great what? Don't leave me hanging my imagination is running wild
 
SaltyDog said:
Unless you're spouse is a CPA it's just worth it to do your own taxes at the attending level. Way too much on the line. We bitch about people trying to be their own doctor then turn around and try to be our own CPA's. Plus, the their fee is deductible so it's pretty cheap given the piece of mind.
Click to expand...
Eh. Done Turbotax every year including a year I hired an accountant to do them. TT and the accountant got to the same number. Unless you have complicated circumstances, an accountant can't help all that much unless you just don't want to deal when TT yourself. But as W2 employees with all my investments in tax sheltered accounts, I just don't see the point.
 
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IlDestriero said:
If she only made $50 grand or so it probably would not be worth it for her to work, but she doesn't. All her income pays for additional savings, retirement, mortgage pay downs, one time large expenses, etc. while still living a pretty comfortable lifestyle in an expensive area.
She's worth millions. And she has a great ...
;)

--
Il Destriero
Click to expand...


Don't underestimate the decrease in spending when she is at work compared to having more free time at home. I find that my wife's effective salary doubles by spending less while she is at work.
 
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Mman said:
Don't underestimate the decrease in spending when she is at work compared to having more free time at home. I find that my wife's effective salary doubles by spending less while she is at work.
Click to expand...

That's a good point. If I ever meet someone who works for Amazon I'm gonna punch him in the face.
 
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A stay at home parent does bring a lot of value though when you think how much you're not spending on nannies, daycare, transportation, etc. plus it's nice not having to coordinate 2 work schedules. When I'm off, we're all off.
 
AdmiralChz said:
Had a similar situation this year, we use an accountant who showed us we were filing everything wrong. Saved us far more than his cost. Won't be doing our taxes alone anymore.
Click to expand...

How were you doing it wrong and more importantly was the accountant's way? Were you filing as married filing separately? Not taking deductions even though you were a 1099?
 
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bigdan said:
All -

Do any of you have ideas on how to - legally - soften the blow of the marriage tax penalty?

Wife is also a physician. This is our first full tax year of two attending income. When we run the taxes through as "filing single", we owe about $2K each. When we run the numbers as "married" (either separately or joint file), we owe >$40k. WTF.

I've already made sure they take all the money that they should.

What else can I do? What am I missing?
Click to expand...


I've only heard great things about this guy: http://cordellcordell.com/offices/pennsylvania/pittsburgh/

:corny:
 
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