Tax tip: Despite what you may think, the marriage penalty is still alive and well. Whether you’re changing your filing status in 2019 because of marriage, divorce or another event (or it’s staying the same), you should review this information and plan accordingly. 👰🏼🤵🏻⠀⠀⠀⠀⠀⠀⠀⠀⠀
What is the marriage penalty?⠀⠀⠀⠀⠀⠀⠀⠀⠀
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The marriage penalty occurs when the dollar ranges for married taxpayers (joint filers) are not exactly double the dollar ranges for single taxpayers. It results from the way the graduated tax rate system works, based on your tax filing status and other tax return items. Married taxpayers are often taxed more than they’d be as two single filers.⠀⠀⠀⠀⠀⠀⠀⠀⠀
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Situation subject to the marriage penalty👇🏼⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀
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Income disparity between spouses. For example, Riley makes $30,000 per year and Avery makes $150,000. Before getting married, Riley has a marginal tax rate of 12 percent and Avery has a marginal tax rate of 24 percent. Once they marry, their income is combined and Riley’s tax rate is now taxed at Avery’s marginal tax rate of 24 percent.⠀⠀⠀⠀⠀⠀⠀⠀⠀
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Tax-planning opportunity 💡💡💡. ⠀⠀⠀⠀⠀⠀⠀⠀⠀
While no one is saying you should get married or divorced because of the marriage penalty, factoring it into your tax planning can make a big difference.