If you and your partner both make serious money, you may want to stay single for tax purposes
. If you look at the tax brackets below, you may notice that most of them for married filing jointly taxpayers are double that of the single taxpayer. That's true...until the last couple of brackets! (2022 shown below, but brackets change each year)
So, let's take a couple in which each partner makes $750K for a total of $1.5M. I'll save you the math details, but if they got married and filed jointly, they would pay roughly $510K in federal income taxes (consult your tax advisor as numerous variables may impact these numbers). If they remained single and filed as such, they would each pay about $241K in federal taxes totaling $482K. That's a savings of $28K... per year!
in this country are completely out of control, which sometimes means they can make a considerable dent in our income. The bone the government has thrown taxpayers is the ability to deduct medical expenses if they are more than 7.5% of your adjusted gross income. If one partner has medical expenses that are 7.5% of their own income but not 7.5% of their combined income, it may make sense to remain single or file separately.
Of course, there are other factors involved in filing using different methods, so make sure to consult your tax advisor (as always!).
Millennials become acquainted with large levels of debt
early on in their lives, as many have been saddled with student loan debt.
This is particularly troublesome for professions that require advanced degrees, such as teaching, therapy/psychology, and social work, among others. The issue with those career paths
is that they often aren't the most lucrative, so teachers and social workers have six-figure debt with lower incomes. For that reason, many people in those careers are in income-based repayment programs
In this instance, it may make sense to stay single or file separately. Take a teacher making $60K yearly with $150K of loans paying back $550/mo. The teacher then marries a software engineer who makes $240K per year. Instead of the teacher's loan payments being calculated on $60K, they're being calculated as if they were making $300K! The payment could increase by $1K per month or more and nullify (or worse) any tax benefits
of filing jointly.
I'll say one last time that taxes are complex and that many variables can impact, so you should talk to your tax advisor before running off and filing separately this year.
About the Author - Matt Gray is a Childfree Financial Planner
who holds both the Certified Financial Planner® designation and the Chartered
Advisor of Philanthropy designation. He enjoys working with his Childfree peers
because he enjoys helping solve the specific needs of the Childfree community.
Furthermore, he believes choosing a less traditional life path leads to more
unique life stories and he loves helping those stories become a reality. Matt
co-hosts the Childfree Life and Money Podcast with Dr. Jay.