Just realized I'm barely paying any fed taxes this year

[VirginiaBob]

Income : 99k

Payroll deductions:
Health plan:  $4k
Dental vision:  $500
FSA: $1.5k
SS/med (though kind of a tax):$7k
Pension ded: $1k
401k: 17.5 k

Deductions:
Trad Ira: $11k ( non working spouse)
Charity: $6k
Mortgage int: $4k
Home tax: $2k
State taxes: $2k
Exemptions: $15.6k

Child tax credit: $2k

Basically $1k in taxes

Help me get rid of the final $1k (without increasing charity)

Lol - this is why the tax system is broken

[Stlbroke]

This is where I don't understand taxes. Don't you pay 25% ish on 67.5k? And then u get to deduct the other stuff and get 25% ish back on a tax return? The "ish" is because of the 10 and 15% u also had to pay. Sorry if this is a stupid question. Any way u could break this down for a dumb dumb like me? I've been wanting to start my own thread on this...

[Stlbroke]

Nevermind. I think I got it

Good job!

[HawkeyeJD]

1. The Social Security and Medicare payments are certainly taxes, there is no other useful way to think about them.  Social Security and Medicare/Medicaid are also 2 of the 3 largest expenses facing the government, with the military being the third.  So it makes sense you can't get out of paying for large chunks of it anyways.

2. That said, the rest is a more interesting social commentary (to me anyways), because basically, the tax system encourages you to buy a house, stay married, and have lots of children.  People that don't do those things get to enjoy subsidizing those that do to an extent. 

So thinking about taxes:

You are paying 8k federal combined, 2k to the state, or about 10 percent of your income,

Depending on what you buy in Virginia, you pay something between 4.3% and 10.3% in sales tax on everything you buy

As to property taxes, 2% here (and again using after tax money to pay this, but just ignoring that here for now).  So just here, we are already up to something like 12% to 20% of your income depending on how much you spend (10% federal/state, 2% property tax, 7% sales tax).  I am sure there are many other taxes and such types of taxes you pay as well, personal property/car/etc that would increase this a few percent as well.  So all in all, even though it is a nice feeling to get that federal income tax number as low as possible, they government "gets" their money one way or another in most instances. 

3. Also note, saving $28,500 a year between the two of you suggests that you will be paying at least some tax on your retirement income someday, and perhaps more than you think if taxes go up, so while you get a decent break now, they government eventually gets some or all of its money.  I like to think of your situation more as deferring taxes now so you can pay hopefully less later rather than a true tax saving. So it is sort of deceptive to say you are "getting rid of taxes" by using the 401k/IRA deductions when really you are just hoping to minimize them someday in the future. 

4. I think taxes are really interesting and just the information above shows how nearly impossible for anyone to truly calculate their true tax burden.  Seems simple in concept but in application is quite difficult since really, you can't figure it out until you die and look back at your whole life (to know the true tax implications of all that deferred income and any taxes paid on your estate as it passes to heirs).   

5.  One take away is that you can significantly minimize part of your current tax burden by buying less crap and having a smaller house, and doing things that give true tax exemptions or credits like having a bunch of kids, mortgage interest, and staying married. 

So, the reason I wrote all of the above is that I personally think that the tax system is very broken but likely for different reasons than most.  I think the more taxes become more complex the more opportunities for the wealthy and educated to game the system at the expense of everyone else.  Then again the wealthy do pay the vast majority of taxes on an absolute basis...






6. As to your question, since I am way off topic at this point, if you are itemizing (and it appears you are) check out this link from the IRS:

http://www.irs.gov/taxtopics/tc500.html

More broad than you were looking for, but pretty straight forward list of categories of expenses that can be used as an itemized deduction.  Maybe something in there will align with your life and help you over that last hurdle. 

[MDM]

As HawkeyeJD notes, Uncle Sam and your local tax man are getting a bit more than $1K from you.  Unless you have a large amount of other itemized deductions, it appears the IRS alone will get over $2K in federal income tax.  See tables below.

All that said, you appear to be doing a great job legally minimizing your tax burden and thus helping you and your family get to FI faster.  Good for you.

Category	Monthly amt.	Comments	Annual
Salary/Wages	$8,250	0	$99,000
Pretax Health Ins.	$333	Includes dental & vision	$4,000
Pretax Vision/Dental Ins.	$42	0	$500
Healthcare Flex Savings Acct. (FSA)	$125	0	$1,500
HSA/Pension	$83	0	$1,000
FICA base salary/wages	$7,667	0	$92,000
Traditional IRA	$917	At maximum	$11,000
401(k) / 403(b) / 457(b) / etc.	$1,458	At maximum	$17,500
Income subject to IRS tax	$5,292	0	$63,500
Paycheck income before tax	$5,292	0	$63,500
Federal Adj. Gross Inc.	$5,292	0	$63,500
Federal tax	$179	2014 rates, item. ded., 4 exemptions	$2,147
State/City tax	$167	Guess, using 0.0315 * Fed. AGI	$2,000
Soc. Sec.	$475	Assumes 1 earner paying	$5,704
Medicare	$111	0	$1,334
Total income taxes	$932	0	$11,185

AGI	$63,500
Std. Deduct.	$12,400
Act. Deduct.	$14,000
# Exempt.	4
Exemption	$15,800
SL int. (guess)	$0
Taxable	$33,700
Tax	$4,147
# Children <17	2
Child Tax Cred.	$2,000
Net Tax	$2,147

[sol]

The market is down a bit, tax loss harvest smartly and you can rid yourself of that last $1k.

That, or hurry up and have another child.

Or buy a rental property and deduct the depreciation.

Or install a little solar system for the 30% federal tax credit.

Or pay some education expenses for a family member.

Lots and lots of ways to reduce your AGI even further.  Tax loss harvesting is probably the easiest, if you have a taxable investment account.

[VirginiaBob]

As HawkeyeJD notes, Uncle Sam and your local tax man are getting a bit more than $1K from you.  Unless you have a large amount of other itemized deductions, it appears the IRS alone will get over $2K in federal income tax.  See tables below.

All that said, you appear to be doing a great job legally minimizing your tax burden and thus helping you and your family get to FI faster.  Good for you.

Category	Monthly amt.	Comments	Annual
Salary/Wages	$8,250	0	$99,000
Pretax Health Ins.	$333	Includes dental & vision	$4,000
Pretax Vision/Dental Ins.	$42	0	$500
Healthcare Flex Savings Acct. (FSA)	$125	0	$1,500
HSA/Pension	$83	0	$1,000
FICA base salary/wages	$7,667	0	$92,000
Traditional IRA	$917	At maximum	$11,000
401(k) / 403(b) / 457(b) / etc.	$1,458	At maximum	$17,500
Income subject to IRS tax	$5,292	0	$63,500
Paycheck income before tax	$5,292	0	$63,500
Federal Adj. Gross Inc.	$5,292	0	$63,500
Federal tax	$179	2014 rates, item. ded., 4 exemptions	$2,147
State/City tax	$167	Guess, using 0.0315 * Fed. AGI	$2,000
Soc. Sec.	$475	Assumes 1 earner paying	$5,704
Medicare	$111	0	$1,334
Total income taxes	$932	0	$11,185

AGI	$63,500
Std. Deduct.	$12,400
Act. Deduct.	$14,000
# Exempt.	4
Exemption	$15,800
SL int. (guess)	$0
Taxable	$33,700
Tax	$4,147
# Children <17	2
Child Tax Cred.	$2,000
Net Tax	$2,147

wow thanks for the breakdown!   So it looks like I'm closer to $2k - time to work on getting those extra deductions!

[VirginiaBob]

1. The Social Security and Medicare payments are certainly taxes, there is no other useful way to think about them.  Social Security and Medicare/Medicaid are also 2 of the 3 largest expenses facing the government, with the military being the third.  So it makes sense you can't get out of paying for large chunks of it anyways.

2. That said, the rest is a more interesting social commentary (to me anyways), because basically, the tax system encourages you to buy a house, stay married, and have lots of children.  People that don't do those things get to enjoy subsidizing those that do to an extent. 

So thinking about taxes:

You are paying 8k federal combined, 2k to the state, or about 10 percent of your income,

Depending on what you buy in Virginia, you pay something between 4.3% and 10.3% in sales tax on everything you buy

As to property taxes, 2% here (and again using after tax money to pay this, but just ignoring that here for now).  So just here, we are already up to something like 12% to 20% of your income depending on how much you spend (10% federal/state, 2% property tax, 7% sales tax).  I am sure there are many other taxes and such types of taxes you pay as well, personal property/car/etc that would increase this a few percent as well.  So all in all, even though it is a nice feeling to get that federal income tax number as low as possible, they government "gets" their money one way or another in most instances. 

3. Also note, saving $28,500 a year between the two of you suggests that you will be paying at least some tax on your retirement income someday, and perhaps more than you think if taxes go up, so while you get a decent break now, they government eventually gets some or all of its money.  I like to think of your situation more as deferring taxes now so you can pay hopefully less later rather than a true tax saving. So it is sort of deceptive to say you are "getting rid of taxes" by using the 401k/IRA deductions when really you are just hoping to minimize them someday in the future. 

4. I think taxes are really interesting and just the information above shows how nearly impossible for anyone to truly calculate their true tax burden.  Seems simple in concept but in application is quite difficult since really, you can't figure it out until you die and look back at your whole life (to know the true tax implications of all that deferred income and any taxes paid on your estate as it passes to heirs).   

5.  One take away is that you can significantly minimize part of your current tax burden by buying less crap and having a smaller house, and doing things that give true tax exemptions or credits like having a bunch of kids, mortgage interest, and staying married. 

So, the reason I wrote all of the above is that I personally think that the tax system is very broken but likely for different reasons than most.  I think the more taxes become more complex the more opportunities for the wealthy and educated to game the system at the expense of everyone else.  Then again the wealthy do pay the vast majority of taxes on an absolute basis...






6. As to your question, since I am way off topic at this point, if you are itemizing (and it appears you are) check out this link from the IRS:

http://www.irs.gov/taxtopics/tc500.html

More broad than you were looking for, but pretty straight forward list of categories of expenses that can be used as an itemized deduction.  Maybe something in there will align with your life and help you over that last hurdle.

1.  Agreed, but interestingly, assuming  nothing changes ( although it probably will), I'll actually make out on this tax since I have a non- working spouse.  She never paid in, but will still collect an extra 50% of my benefit.  So our returns on what I put in are a lot higher than they would be if I chose to be single - another subsidy we get from the single people just for being married.

2.  Also agreed, lots of other taxes.  Minimizing consumer spending minimizes sales tax.  renting would cut out real estate taxes, but with obvious trade offs.  The exemption amounts for va state taxes are less generous than the federal, plus no child tax credit on the state-really hard to reduce the state taxes further.  The tax man cometh, but the goal is to minimize his take.

3.  yes, will pay taxes later on the tax differed income, but Will have a whole new set of deductions/ exemptions for that lower income.  Probably no mortgage interest, child credits, or extra exemptions at that time, so will have to be creative.  Plan is to pay no/very little taxes then as well.  Even with standard deductions and health insurance ded, will be $17k ded ( using today's numbers) before I even start paying taxes, and will be in the 10 % bracket for another $18k or so.   Hopefully my tax strategy will be much more creative than the standard ded.

I think all of this is kind of silly though, I was also once single and w/o kids or house for a portion of my life.  Why should everyone be subsidizing families w/ kids and houses?  I know why - votes. 

[Rural]

2. That said, the rest is a more interesting social commentary (to me anyways), because basically, the tax system encourages you to buy a house, stay married, and have lots of children.  People that don't do those things get to enjoy subsidizing those that do to an extent. 

The system encourages carrying a mortgage, not buying a house. There's no tax incentive to actually own one, the opposite in fact.

[Gin1984]

Also, benefits for kids are highest for the first two (now three, though that may go away).

[VirginiaBob]

Interestingly, looking at the the historical stats, about 70% of married couples vote and only about 54% of singles (never married) vote.  Of additional significance (although I can't prove this, just assuming some idealogical compatibilty) is that married couples tend to vote for the same candidates.  So winning over a married couple gets you 2 votes  for the same candidate in most cases, and at a 70% rate.

[teen persuasion]

Also, benefits for kids are highest for the first two (now three, though that may go away).

True, at least for the EITC, but VirginiaBob isn't eligible.

[rocksinmyhead]

2. That said, the rest is a more interesting social commentary (to me anyways), because basically, the tax system encourages you to buy a house, stay married, and have lots of children.  People that don't do those things get to enjoy subsidizing those that do to an extent. 

I was gonna say, man, I'm really getting fucked by not being married or owning a house or having kids!

Nice work VirginiaBob. Gotta say I'm kind of jealous. Also the bf and I need to go ahead and get married already, our incomes are very unequal and household income for 2014 will be between $150-200K: http://taxfoundation.org/article/effects-marriage-tax-burden-vary-greatly-income-level-equality (PS. I love this chart so thanks to whoever originally posted it here)

[Roland of Gilead]

No kids, no mortgage, 60k federal taxes here

Next year though...


No house, no job, 10k interest, 20k dividends, 20k cash, almost free healthcare via ACA, 0 federal/state tax

[Pooperman]

No kids, no mortgage, 60k federal taxes here

Next year though...


No house, no job, 10k interest, 20k dividends, 20k cash, almost free healthcare via ACA, 0 federal/state tax

You pay as much in federal taxes as I make :o

[VirginiaBob]

No kids, no mortgage, 60k federal taxes here

Next year though...


No house, no job, 10k interest, 20k dividends, 20k cash, almost free healthcare via ACA, 0 federal/state tax

You pay as much in federal taxes as I make :o

That's what I was thinking - dang thats a lot.  I need to get off my butt and expand my nano-business to mini-businesses to get that income up.

[HawkeyeJD]

2. That said, the rest is a more interesting social commentary (to me anyways), because basically, the tax system encourages you to buy a house, stay married, and have lots of children.  People that don't do those things get to enjoy subsidizing those that do to an extent. 

The system encourages carrying a mortgage, not buying a house. There's no tax incentive to actually own one, the opposite in fact.

You are right that mortgage interest is the biggest element here, but in fact you can also deduct property taxes paid for your home against your federal income tax if you itemize:

IRS Topic 503 states there are four types of deductible non-business taxes:

•State, local and foreign income taxes
•State, local and foreign real estate taxes
•State, and local personal property taxes, and
•State and local general sales taxes


It can get complicated if you are in a high sales tax area and have a low value house (since you can't deduct all of the above each year, but sometimes get to pick).  If you rent, you do not get to deduct the portion of your rent that goes to paying the landlords property tax (although some states like Minnesota allow this at a State level only). 

So even here, home ownership gets some preferential treatment even without a mortgage. 

[sheepstache]

Interestingly, looking at the the historical stats, about 70% of married couples vote and only about 54% of singles (never married) vote.  Of additional significance (although I can't prove this, just assuming some idealogical compatibilty) is that married couples tend to vote for the same candidates.  So winning over a married couple gets you 2 votes  for the same candidate in most cases, and at a 70% rate.

I don't have good evidence either, but someone I knew saw some data they shouldn't and told me the husbands and wives quite often voted differently. It makes sense then that politicians think about "women's issues" rather than single women's issues.  Anyway, this was only data for a very small area in one region, so I bet it varies a lot and you might be right more often than not.

[DoubleDown]

VirginiaBob, I had a very similar situation in the past. I paid about $1,000 Federal tax on a gross income of over $150k. Similar to you, I had two kids and a non-working spouse. We also had a pretty hefty mortgage living in a high cost of living area (Northern Virginia). I thought it was ridiculous to pay <1% tax earning $150k, but I was happy to be the beneficiary of the government's largesse.

In addition to the deductions you've mentioned, we owned a rental property with a mortgage that allowed us to write off even more of our income. At your income, you should be able to claim 100% of passive rental expenses (expenses are 100% deductible up to $100k MAGI, then phased out until it's 0% at $150k MAGI). It's a great way to increase your wealth at the same time as reducing your tax bill.

[HawkeyeJD]

Interestingly, looking at the the historical stats, about 70% of married couples vote and only about 54% of singles (never married) vote.  Of additional significance (although I can't prove this, just assuming some idealogical compatibilty) is that married couples tend to vote for the same candidates.  So winning over a married couple gets you 2 votes  for the same candidate in most cases, and at a 70% rate.

I don't have good evidence either, but someone I knew saw some data they shouldn't and told me the husbands and wives quite often voted differently. It makes sense then that politicians think about "women's issues" rather than single women's issues.  Anyway, this was only data for a very small area in one region, so I bet it varies a lot and you might be right more often than not.

There is some excellent feminist literature and history about the impact that may women have had "behind the scenes" in the past.  For example, much of the literature on prohibition suggests it was largely driven by women fed up with the booze culture and drunkenness of their husbands.  Yet, when you read more mainline history, you only read about the men debating and voting on the issues for the most part. 

[Spartana]

Interestingly, looking at the the historical stats, about 70% of married couples vote and only about 54% of singles (never married) vote.  Of additional significance (although I can't prove this, just assuming some idealogical compatibilty) is that married couples tend to vote for the same candidates.  So winning over a married couple gets you 2 votes  for the same candidate in most cases, and at a 70% rate.

I don't have good evidence either, but someone I knew saw some data they shouldn't and told me the husbands and wives quite often voted differently. It makes sense then that politicians think about "women's issues" rather than single women's issues.  Anyway, this was only data for a very small area in one region, so I bet it varies a lot and you might be right more often than not.

There is some excellent feminist literature and history about the impact that may women have had "behind the scenes" in the past.  For example, much of the literature on prohibition suggests it was largely driven by women fed up with the booze culture and drunkenness of their husbands.  Yet, when you read more mainline history, you only read about the men debating and voting on the issues for the most part.

Carrie Nation and the Temperance Movement. Women, even before the vote, often had a great impact on politics that was far different from their hubby's own political leanings.

ETA: I won't be paying any Fed or state taxes myself this year - but that's only because my taxable income is very low not because of write offs. Just taking the single no kids standard deduction and exemption.

[Eric]

Interestingly, looking at the the historical stats, about 70% of married couples vote and only about 54% of singles (never married) vote.  Of additional significance (although I can't prove this, just assuming some idealogical compatibilty) is that married couples tend to vote for the same candidates.  So winning over a married couple gets you 2 votes  for the same candidate in most cases, and at a 70% rate.

There's something missing here.  The Gen Pop only votes at about a 50% rate.  Married and single can't both be above that line.  Presidential elections get the highest turn out and they're only at ~55% for the last 50-60 years.

http://en.wikipedia.org/wiki/Voter_turnout_in_the_United_States_presidential_elections

[Spartana]

Interestingly, looking at the the historical stats, about 70% of married couples vote and only about 54% of singles (never married) vote.  Of additional significance (although I can't prove this, just assuming some idealogical compatibilty) is that married couples tend to vote for the same candidates.  So winning over a married couple gets you 2 votes  for the same candidate in most cases, and at a 70% rate.

There's something missing here.  The Gen Pop only votes at about a 50% rate.  Married and single can't both be above that line.  Presidential elections get the highest turn out and they're only at ~55% for the last 50-60 years.

http://en.wikipedia.org/wiki/Voter_turnout_in_the_United_States_presidential_elections

Maybe only one person in a marriage is doing the actual voting but they skewed the statistic to make it look like "married couples vote more often" and that looks like 2 votes rather than one.

[VirginiaBob]

Interestingly, looking at the the historical stats, about 70% of married couples vote and only about 54% of singles (never married) vote.  Of additional significance (although I can't prove this, just assuming some idealogical compatibilty) is that married couples tend to vote for the same candidates.  So winning over a married couple gets you 2 votes  for the same candidate in most cases, and at a 70% rate.

There's something missing here.  The Gen Pop only votes at about a 50% rate.  Married and single can't both be above that line.  Presidential elections get the highest turn out and they're only at ~55% for the last 50-60 years.

Was looking at the census data and basing off eligible voters (rather than entire population), not wiki, and not back that far in time.  As noted, values were approx. for simplicity sake.  Did not post it for sake of debating which set of data is more accurate,but just for the single/married comparison purposes.

[Wile E. Coyote]

Income : 99k

Payroll deductions:
Health plan:  $4k
Dental vision:  $500
FSA: $1.5k
SS/med (though kind of a tax):$7k
Pension ded: $1k
401k: 17.5 k

Deductions:
Trad Ira: $11k ( non working spouse)
Charity: $6k
Mortgage int: $4k
Home tax: $2k
State taxes: $2k
Exemptions: $15.6k

Child tax credit: $2k

Basically $1k in taxes

Help me get rid of the final $1k (without increasing charity)

Lol - this is why the tax system is broken

How are you getting 11k in deductible IRA contributions and maxing out your 401(k) in the same tax year?

[VirginiaBob]

Income : 99k

Payroll deductions:
Health plan:  $4k
Dental vision:  $500
FSA: $1.5k
SS/med (though kind of a tax):$7k
Pension ded: $1k
401k: 17.5 k

Deductions:
Trad Ira: $11k ( non working spouse)
Charity: $6k
Mortgage int: $4k
Home tax: $2k
State taxes: $2k
Exemptions: $15.6k

Child tax credit: $2k

Basically $1k in taxes

Help me get rid of the final $1k (without increasing charity)

Lol - this is why the tax system is broken

How are you getting 11k in deductible IRA contributions and maxing out your 401(k) in the same tax year?

Because it is allowed.

[Beric01]

The OP's post is an example of why single people are screwed in this country. I pay more than 1/4 of my income in taxes on less earnings, and that includes maxing my 401(k).

I do not understand why "marital status" is a concern of the government. There's been a a big campaign for gay marriage rights as of late, but what about a campaign for the rights of single people? We pay taxes, we volunteer to help others and care about the future of society beyond our immediate person. And yet we subsidize everyone else in  taxes. There are 1,138 mentions of marriage in federal laws. I think government should get out of marriage completely. Let people marry whoever they want, but keep it a private contract.

[Eric]

The OP's post is an example of why single people are screwed in this country. I pay more than 1/4 of my income in taxes on less earnings, and that includes maxing my 401(k).

I do not understand why "marital status" is a concern of the government. There's been a a big campaign for gay marriage rights as of late, but what about a campaign for the rights of single people? We pay taxes, we volunteer to help others and care about the future of society beyond our immediate person. And yet we subsidize everyone else in  taxes. There are 1,138 mentions of marriage in federal laws. I think government should get out of marriage completely. Let people marry whoever they want, but keep it a private contract.

It's probably a little too late to put that genie back in the bottle.

Up until a few years ago (or maybe 10-ish now), there was actually a marriage penalty when it came to tax payments.  That's since been eliminated.  If the OPs wife also worked, they'd pay taxes at the same rate as you do.  The deductions are from kids and mortgage interest and the like that aren't relegated only to married people.

[Beric01]

The OP's post is an example of why single people are screwed in this country. I pay more than 1/4 of my income in taxes on less earnings, and that includes maxing my 401(k).

I do not understand why "marital status" is a concern of the government. There's been a a big campaign for gay marriage rights as of late, but what about a campaign for the rights of single people? We pay taxes, we volunteer to help others and care about the future of society beyond our immediate person. And yet we subsidize everyone else in  taxes. There are 1,138 mentions of marriage in federal laws. I think government should get out of marriage completely. Let people marry whoever they want, but keep it a private contract.

It's probably a little too late to put that genie back in the bottle.

Up until a few years ago (or maybe 10-ish now), there was actually a marriage penalty when it came to tax payments.  That's since been eliminated.  If the OPs wife also worked, they'd pay taxes at the same rate as you do.  The deductions are from kids and mortgage interest and the like that aren't relegated only to married people.

I don't understand why the OP's taxes should be subsidized because the OP's wife doesn't work. "Married filing jointly" is an incredible loophole that is unfair to single people.

Or look at Social Security.

“A childless singleton can work side by side with a childless married person, doing the same job, for the same number of years, at the same level of accomplishment—and when the married person dies, that worker can leave his or her Social Security benefits to a spouse,” says DePaulo. “The single person’s benefits go back into the system.”

Or take that singles contribute more to society:

“On average, singles have more disposable income,” Klinenberg says. “They're fueling urban economies that would be in much worse shape without them. And compared to married people, they’re more likely to spend time with neighbors, to participate in public events, and to volunteer.”

Please note I'm leaving children out of this discussion.

[Sylly]

This thread is depressing. We're DINKs with fairly equal incomes. People can live well off the amount of taxes we've paid YTD.

Up until a few years ago (or maybe 10-ish now), there was actually a marriage penalty when it came to tax payments.  That's since been eliminated. 

Not completely. The tax brackets still reflect penalty for upper 25% bracket and up.

[Spartana]

“On average, singles have more disposable income,” Klinenberg says. “They're fueling urban economies that would be in much worse shape without them. And compared to married people, they’re more likely to spend time with neighbors, to participate in public events, and to volunteer.”

Please note I'm leaving children out of this discussion.

Why would a single person have more disposable income then a married couple? If they are DINKS then they can have a much larger disposable income just because of the shared housing alone. If you pay $1,000/month for your one bedroom apt and a married couple pays $1000/month for the same one bedroom apt then that's an extra $500/month of disposable income for each. Add kids or a SAH or both and that does change things.

[sol]

there was actually a marriage penalty when it came to tax payments.  That's since been eliminated.

I wish.  For professional couple who have roughly similar incomes (like me and mine), the marriage penalty is still very much a thing.

[Beric01]

there was actually a marriage penalty when it came to tax payments.  That's since been eliminated.

I wish.  For professional couple who have roughly similar incomes (like me and mine), the marriage penalty is still very much a thing.

So then why don't you "divorce" in name only? What matters is the commitment between you, not the government's name on a piece of paper, right? Or is it because it gives you other benefits that singles can't enjoy?

[Wile E. Coyote]

Income : 99k

Payroll deductions:
Health plan:  $4k
Dental vision:  $500
FSA: $1.5k
SS/med (though kind of a tax):$7k
Pension ded: $1k
401k: 17.5 k

Deductions:
Trad Ira: $11k ( non working spouse)
Charity: $6k
Mortgage int: $4k
Home tax: $2k
State taxes: $2k
Exemptions: $15.6k

Child tax credit: $2k

Basically $1k in taxes

Help me get rid of the final $1k (without increasing charity)

Lol - this is why the tax system is broken

How are you getting 11k in deductible IRA contributions and maxing out your 401(k) in the same tax year?

Because it is allowed.

Ahh, my mistake.  I thought that you couldn't take a deduction if you were covered by an employer plan.  I didn't realize that it was only if you made more than a certain amount.

[kelly1mm]

The OP's post is an example of why single people are screwed in this country. I pay more than 1/4 of my income in taxes on less earnings, and that includes maxing my 401(k).

I do not understand why "marital status" is a concern of the government. There's been a a big campaign for gay marriage rights as of late, but what about a campaign for the rights of single people? We pay taxes, we volunteer to help others and care about the future of society beyond our immediate person. And yet we subsidize everyone else in  taxes. There are 1,138 mentions of marriage in federal laws. I think government should get out of marriage completely. Let people marry whoever they want, but keep it a private contract.

It's probably a little too late to put that genie back in the bottle.

Up until a few years ago (or maybe 10-ish now), there was actually a marriage penalty when it came to tax payments.  That's since been eliminated.  If the OPs wife also worked, they'd pay taxes at the same rate as you do.  The deductions are from kids and mortgage interest and the like that aren't relegated only to married people.

I don't understand why the OP's taxes should be subsidized because the OP's wife doesn't work. "Married filing jointly" is an incredible loophole that is unfair to single people.

Or look at Social Security.

“A childless singleton can work side by side with a childless married person, doing the same job, for the same number of years, at the same level of accomplishment—and when the married person dies, that worker can leave his or her Social Security benefits to a spouse,” says DePaulo. “The single person’s benefits go back into the system.”

Or take that singles contribute more to society:

“On average, singles have more disposable income,” Klinenberg says. “They're fueling urban economies that would be in much worse shape without them. And compared to married people, they’re more likely to spend time with neighbors, to participate in public events, and to volunteer.”

Please note I'm leaving children out of this discussion.

Well, if it makes you feel any better, there is a MASSIVE marriage penalty in the ACA (Obamacare).  Singles can make up to about $45k each till subsidies are eliminated.  Married couples can only make about $64k combined. 

The true best case scenario to get the most out of the tax system is almost always to be married and only have one spouse have taxable income.

[Undecided]

I do not understand why "marital status" is a concern of the government.

Or take that singles contribute more to society:

As background, I've been on both (or three?) sides of the "marriage penalty" vs. "marriage bonus" tax situation personally. Which is to say, I spent several years in the top or second-highest federal tax bracket as a "single" person living with my eventual spouse. While married, when my spouse was working, we were on the "penalty" side of the married tax brackets. For the past few years, my spouse has been a full-time stay-at-home caregiver and so our tax bill has been lower than mine would be if I were now single.

All that said, I think that government in fact should have a role in supporting stable family relationships, including not only marital ones, but caregiving relationships between family members, whether taking care of one's own children or taking care of one's own parents. I prefer a society with more of those things. I want my government to support the society I want.

Your quote regarding "disposable income" may be a red herring to the extent that married people are more likely to have children than single people are, and that spending on children may not be "disposable income" even though it nonetheless contributes to the economy.

[VirginiaBob]

I do not understand why "marital status" is a concern of the government.

Or take that singles contribute more to society:

All that said, I think that government in fact should have a role in supporting stable family relationships, including not only marital ones, but caregiving relationships between family members, whether taking care of one's own children or taking care of one's own parents. I prefer a society with more of those things. I want my government to support the society I want.

I kind of agree but also kind of disagree.  Talking in generalities here - realize exceptions to these situations, blah blah blah, etc., disclaimor:  Person A gets a tax break for already being blessed by finding a compatible spouse.  Person B would like to find a compatible spouse, but can't find one. Person B now has 2 choices - live a life of loneliness and get no tax break or enter a marriage of convenience.  Or , person A blessed with 3 children, getting the extra reward of the best tax breaks.  person B is infertile, lives a life of pain for what could have been , and gets the extra bonus of getting to forcefully subsidize those who are living person B's dreams.  Tried going the adoption route, but realized the competition for non- crack babes is too high.

[Undecided]

I do not understand why "marital status" is a concern of the government.

Or take that singles contribute more to society:

All that said, I think that government in fact should have a role in supporting stable family relationships, including not only marital ones, but caregiving relationships between family members, whether taking care of one's own children or taking care of one's own parents. I prefer a society with more of those things. I want my government to support the society I want.

I kind of agree but also kind of disagree.  Talking in generalities here - realize exceptions to these situations, blah blah blah, etc., disclaimor:  Person A gets a tax break for already being blessed by finding a compatible spouse.  Person B would like to find a compatible spouse, but can't find one. Person B now has 2 choices - live a life of loneliness and get no tax break or enter a marriage of convenience.  Or , person A blessed with 3 children, getting the extra reward of the best tax breaks.  person B is infertile, lives a life of pain for what could have been , and gets the extra bonus of getting to forcefully subsidize those who are living person B's dreams.  Tried going the adoption route, but realized the competition for non- crack babes is too high.

I said "support," not "induce," and I think there are policy tools that can generally achieve a reasonable degree of the latter without unduly creating the former. The fact that not every interested person will achieve any given desired outcome doesn't make me think that society and government shouldn't nonetheless support certain outcomes generally. I don't see society as being about optimal outcomes for every member individually.

[Elisabeth]

Just curious why you and non-working spouse choose traditional IRAs instead of Roth. Obviously the tax benefit exists with your current choice, but at your income level you could still get the Roth benefit...?

[VirginiaBob]

Just curious why you and non-working spouse choose traditional IRAs instead of Roth. Obviously the tax benefit exists with your current choice, but at your income level you could still get the Roth benefit...?

Roth IRA would require me to pay taxes now, but the traditional requires me to pay taxes later.  If I invest in the Roth instead, the income I would use to fund it will be at taxed 15%.  If I am creative enough during retirement, the taxes that I pay on the traditional IRA withdrawals will only be 10%.  Obviously, much of this is influenced by future tax policy.

[StashDaddy]

I wish.  For professional couple who have roughly similar incomes (like me and mine), the marriage penalty is still very much a thing.

+1!  My wife and I are both fairly high-paid engineering professionals, and last year our tax bill came out to be almost $50k.  For us, the marriage penalty was enough to equal the amount of taxes that a THIRD person making 6-figures would have paid.  So 2 married people paying the equivalent taxes of 3 single people.  So don't feel too bad, single folks--last year, I was subsidizing you!  Now, once our 2nd child comes, my wife will quit her job, and our taxes will drop dramatically (altho we will be pulling in much less money). 

[VirginiaBob]

I wish.  For professional couple who have roughly similar incomes (like me and mine), the marriage penalty is still very much a thing.

+1!  My wife and I are both fairly high-paid engineering professionals, and last year our tax bill came out to be almost $50k.  For us, the marriage penalty was enough to equal the amount of taxes that a THIRD person making 6-figures would have paid.  So 2 married people paying the equivalent taxes of 3 single people.  So don't feel too bad, single folks--last year, I was subsidizing you!  Now, once our 2nd child comes, my wife will quit her job, and our taxes will drop dramatically (altho we will be pulling in much less money).

You are correct, this puts you in the 33% tax bracket, while a single person would be in the 28% tax bracket.  I just threw in some examples based on the tables and in your case, it works out to about a $6K difference taxes per year, which is pretty significant.  You would be better off divorced from a tax perspective anyways.

[Fuzzy Buttons]

As a single person with no children, I'm happy to subsidize those who do chose to have kids.  Kids are expensive to raise, but they provide financial benefits for all of society.  Those little buggers are gonna fund my Social Security, increase the shareholder value of the companies I own stock in, and provide me a target for my "Get off my lawn!" rants in old age.  So thanks, parents!  :)

[gimp]

I find all the deductions ridiculous. I get to (and do) use a half-dozen ways to increase my money and decrease my taxes, and I'm exactly the demographic who is most capable to take advantage of these programs, and least needing them.

I would be in favor of a system with no deductions, credits, refunds, etc -- whatsoever. Even if it means I pay more. You earn X, here's your sliding scale that says you pay Y%, we don't care if you have kids or donate to church or go to school or whatever you choose to do.

(Also, can we get that sliding income scale to be more of a curve, instead of brackets? Brackets are only useful for simple paper math; we all have computers that can calculate a simple curve for us.)

[Gin1984]

I find all the deductions ridiculous. I get to (and do) use a half-dozen ways to increase my money and decrease my taxes, and I'm exactly the demographic who is most capable to take advantage of these programs, and least needing them.

I would be in favor of a system with no deductions, credits, refunds, etc -- whatsoever. Even if it means I pay more. You earn X, here's your sliding scale that says you pay Y%, we don't care if you have kids or donate to church or go to school or whatever you choose to do.

(Also, can we get that sliding income scale to be more of a curve, instead of brackets? Brackets are only useful for simple paper math; we all have computers that can calculate a simple curve for us.)

Why would you want it like that?

[gimp]

I think the brackets make transitions too sudden. They also paint half the picture - for example, I'm in the 28% bracket but it doesn't mean I pay 28%. I think a curve would make it complicated enough to not let anyone misunderstand it - they either understand the curve, or they plug in their income and get a number and understand the final number. Essentially obfuscating a system that is currently too complex to be properly understood by most people, but simple enough to be improperly understood, to be one that is too obfuscated to have dumb opinions about. Or less politely, separating stupid people from things they don't understand anyways, and pointing them at a place where they put in one number and get another number that they actually understand.

It also allows for a lot of optimization - instead of only being able to grab and adjust a few points (where the brackets are and what % the brackets are), you can adjust any point in any way you want, and the whole curve at once. The beauty of being able to do that is that the curve can be generated mostly from solving an optimization problem given certain inputs (how many people earn how much and how much spending is requested), essentially de-politicizing it (no more endless debates about an extra bracket for an extra 2% from a small group of people -- just regenerate the curve every year; now the slight differences every year are just shrug-worthy.)

Mostly the same way that central banks react to economic conditions by a prod here and a poke there - the common man might know that they do it and be generally angry (anything involving government and money means anger) but knows not nearly enough to actually argue about it at length, except for the odd crackpot here and there.

[VirginiaBob]

I think the brackets make transitions too sudden. They also paint half the picture - for example, I'm in the 28% bracket but it doesn't mean I pay 28%. I think a curve would make it complicated enough to not let anyone misunderstand it - they either understand the curve, or they plug in their income and get a number and understand the final number. Essentially obfuscating a system that is currently too complex to be properly understood by most people, but simple enough to be improperly understood, to be one that is too obfuscated to have dumb opinions about. Or less politely, separating stupid people from things they don't understand anyways, and pointing them at a place where they put in one number and get another number that they actually understand.

It also allows for a lot of optimization - instead of only being able to grab and adjust a few points (where the brackets are and what % the brackets are), you can adjust any point in any way you want, and the whole curve at once. The beauty of being able to do that is that the curve can be generated mostly from solving an optimization problem given certain inputs (how many people earn how much and how much spending is requested), essentially de-politicizing it (no more endless debates about an extra bracket for an extra 2% from a small group of people -- just regenerate the curve every year; now the slight differences every year are just shrug-worthy.)

Mostly the same way that central banks react to economic conditions by a prod here and a poke there - the common man might know that they do it and be generally angry (anything involving government and money means anger) but knows not nearly enough to actually argue about it at length, except for the odd crackpot here and there.

I find this interesting.  One thing though that may not work is to adjust the curve to match spending levels instead of debating it.  If we allow the government the power to just do this to match spending every year, spending will quickly go through the roof.  In a way, the endless debates keep the rates lower than they would be without them.  We would still have to have some method to cap the rates.  I may have misunderstood what you meant on this though.

[sol]

I think the brackets make transitions too sudden.

I like the brackets.  I like the certainty of knowing what my marginal rate is, exactly, for tax planning purposes. 

If we used a curve you'd never really know what the tax implications of a new deduction or purchase would be, because the first dollar of the purchase would be taxed differently than the last dollar of the same purchase.  Right now, I can safely assume everything we do is in the 28% bracket.

[retired?]

I wish.  For professional couple who have roughly similar incomes (like me and mine), the marriage penalty is still very much a thing.

+1!  My wife and I are both fairly high-paid engineering professionals, and last year our tax bill came out to be almost $50k.  For us, the marriage penalty was enough to equal the amount of taxes that a THIRD person making 6-figures would have paid.  So 2 married people paying the equivalent taxes of 3 single people.  So don't feel too bad, single folks--last year, I was subsidizing you!  Now, once our 2nd child comes, my wife will quit her job, and our taxes will drop dramatically (altho we will be pulling in much less money).

And high earners really subsidize moderate to low earners.  The poster that pays 60k, I would guess earns around 300k.....maybe 250, maybe higher.  That's 30x what the OP will pay.  Earn 3x as much, but pay 30x as much.  Just makes me think of all the "fair share" commentary and anger towards 1%-ers during the last election.

Other point - seems most agree, but why would anyone want the government to steer individual behavior when it comes to personal choices?  In particular, having children or not, married or not, homeowner or not (we saw how the Fed Govt's goal of increasing homeownership worked....via HUD setting criteria for Fannie and Freddie).  Really, we don't need or want them to encourage any behavior other than discouraging criminal behavior. 

A society where work, increasing one's skills, and generally being successful is rewarded does enough to incentivize the population.

Taxes should not be used as a vehicle for public policy.  But, to use a phrase from above, the boat has already sailed on that one.  Too many people/firms benefit from having a complex code....and they will protect their interests.  Tax reform is low on the radar.

[beltim]

Other point - seems most agree, but why would anyone want the government to steer individual behavior when it comes to personal choices?  In particular, having children or not, married or not, homeowner or not (we saw how the Fed Govt's goal of increasing homeownership worked....via HUD setting criteria for Fannie and Freddie).  Really, we don't need or want them to encourage any behavior other than discouraging criminal behavior. 

A society where work, increasing one's skills, and generally being successful is rewarded does enough to incentivize the population.

Taxes should not be used as a vehicle for public policy.  But, to use a phrase from above, the boat has already sailed on that one.  Too many people/firms benefit from having a complex code....and they will protect their interests.  Tax reform is low on the radar.

I fully support using tax policy to encourage behavior.  And I suspect you do, too, on some level: how do you feel about getting tax benefits for retirement savings?