Author Topic: 2018 Marriage Tax Penalty? Help Me Elope :)  (Read 2300 times)

2Birds1Stone

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2018 Marriage Tax Penalty? Help Me Elope :)
« on: January 18, 2018, 04:26:54 PM »
SO and I got engaged in August. We were planning on a longer 2-3 year engagement.

I started on my 2017 taxes and learned that her being on my health insurance, means that my company counts the premiums they pay on her behalf as something called "imputed income" for which I am taxed. As a result I owe a surprise $2,900 more in taxes for 2017 that I anticipated.

The only way for this imputed income to go away, is getting married, or kicking her off my insurance (she has an inferior plan from work, or can get one on the NYS healthcare exchange)

I'm trying to figure out what the other impact would be to our taxes for 2018 if we were to elope asap for the purposes of savings ~$3,150 in taxes for 2018 associated with health insurance.

There are plenty of calculators online to calculate marriage tax penalty for 2017 and prior, but not one I found for 2018. Can someone who is good with this stuff help me out?

Significant info

$92,000 - My income
$43,000 - Her Income

Both contribute $18k/yr into 401k, I contribute $6,400 into HSA, we have no dependents, no mortgage, and will take standard deduction for 2018.

How much more/less would our tax liability be if we got married in 2018, vs filing single individually? 

Thanks.

MDM

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Re: 2018 Marriage Tax Penalty? Help Me Elope :)
« Reply #1 on: January 18, 2018, 04:39:21 PM »
How much more/less would our tax liability be if we got married in 2018, vs filing single individually? 
You could try the case study spreadsheet for the three calculations.

In general, the marriage tax penalty is lower (for many, zero) in 2018 vs. 2017, but it's easy enough to check specifics.

2Birds1Stone

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Re: 2018 Marriage Tax Penalty? Help Me Elope :)
« Reply #2 on: January 18, 2018, 06:41:53 PM »
Well, it worked out to a difference of -$101 for MFJ

How much more/less would our tax liability be if we got married in 2018, vs filing single individually? 
You could try the case study spreadsheet for the three calculations.

In general, the marriage tax penalty is lower (for many, zero) in 2018 vs. 2017, but it's easy enough to check specifics.

How would I add imputed income?

Basically my employer is charging me taxes on $7,500 of "income" that is really healthcare premiums they pay on my domestic partners behalf.

MDM

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Re: 2018 Marriage Tax Penalty? Help Me Elope :)
« Reply #3 on: January 18, 2018, 07:00:01 PM »
How would I add imputed income?

Basically my employer is charging me taxes on $7,500 of "income" that is really healthcare premiums they pay on my domestic partners behalf.
Depends on whether this is being subjected to FICA taxes or not.  If you do have to pay FICA (SS & Medicare), subtracting the $7500 from your "real" insurance premiums and entering that in cell B4 should work.  E.g., if you pay $4K/yr, you would enter -3500 in B4 instead of 4000.

If not subject to FICA, using "Other taxable income", cell D40, should work.

Does that make things come out as expected?


2Birds1Stone

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Re: 2018 Marriage Tax Penalty? Help Me Elope :)
« Reply #4 on: January 18, 2018, 07:36:51 PM »
How would I add imputed income?

Basically my employer is charging me taxes on $7,500 of "income" that is really healthcare premiums they pay on my domestic partners behalf.
Depends on whether this is being subjected to FICA taxes or not.  If you do have to pay FICA (SS & Medicare), subtracting the $7500 from your "real" insurance premiums and entering that in cell B4 should work.  E.g., if you pay $4K/yr, you would enter -3500 in B4 instead of 4000.

If not subject to FICA, using "Other taxable income", cell D40, should work.

Does that make things come out as expected?

Yes, FICA is withheld.

Genius, it worked like a charm.

So having her on my insurance is costing me $2,707 in 2018 addition to the premium we pay on the HDHP for her. ($92/month for HDHP + decent dental)

$317/month, vs what she should potentially get for $154/month through her employer.

The only reason I had her on my insurance for 2017 was to save her the $62 we thought we were saving by going with my insurance. I had NO IDEA about imputed income and the tax implications.

It was a $2,000 lesson.

nobody123

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Re: 2018 Marriage Tax Penalty? Help Me Elope :)
« Reply #5 on: January 19, 2018, 08:07:43 AM »
I would look to see if your company has a defensive coordination of benefits provision in its plan.  Essentially, if your spouse is offered insurance by their employer they have to take it before you can add them to your plan.  If you choose to add your spouse to your coverage it would be as the secondary insurer and only pay after your spouse's plan paid out.  That will affect your math.

On a personal note, I will assume you initially agreed on a long engagement for reasons.  Don't risk the health of your relationship for 1 year of tax savings unless your SO is whole-heartedly in agreement about the eloping.

ThriftyTechie

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Re: 2018 Marriage Tax Penalty? Help Me Elope :)
« Reply #6 on: January 20, 2018, 08:38:37 AM »
I seriously hope you’re not rushing to get married to save $2k.
In 2018, most of the previous marriage tax penalty went away because tax brackets for married is now pretty much exactly double of the single bracket. I imagine many couples with unequal income will actually get a large marriage tax bonus.
For my situation, the penalty comes from not being able to itemize once married. The $10k limit on SALT doesn’t double for married.

2Birds1Stone

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Re: 2018 Marriage Tax Penalty? Help Me Elope :)
« Reply #7 on: January 20, 2018, 11:23:35 AM »
I seriously hope you’re not rushing to get married to save $2k.
In 2018, most of the previous marriage tax penalty went away because tax brackets for married is now pretty much exactly double of the single bracket. I imagine many couples with unequal income will actually get a large marriage tax bonus.
For my situation, the penalty comes from not being able to itemize once married. The $10k limit on SALT doesn’t double for married.

Na, we are going to terminate the domestic partnership to get her on her employers plan.

I thought I was helping her by having her on my insurance ($92/month) for health and dental, vs. the $152 she will pay on her own plan.

I was unaware I would be taxed on the $7000 in premiums my employer paid out. Lesson learned.

Eloping would only save $720 for the year.

Our marriage tax bonus would be $101 based on the spreadsheets MDM referenced......so not much of a bonus. I used $92/$43k when I ran the numbers.

Heroes821

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Re: 2018 Marriage Tax Penalty? Help Me Elope :)
« Reply #8 on: January 24, 2018, 08:05:24 AM »
Be aware that you mentioned putting $6000+ into your HSA.  That cap is significantly lower with just you on the plan and HSA money is pre FICA and income tax.

It's great that you are capping your 401k, but you get more tax relief hitting the HSA cap for 2017 ($6,750) than putting the same $350 into your 401k for 2017.


For 2018. The w/ Dependent HSA cap is $6900 vs $3,450. 

I don't think I saw children mentioned anywhere, but if she leaves your HSA plan you will be unable to put $6200 into the HSA this year. Just food for thought, no amount of tax savings is worth getting married early for imo.

 

Wow, a phone plan for fifteen bucks!