Should I file taxes w/o her?

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zz4
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Should I file taxes w/o her?

Post by zz4 » Thu Dec 07, 2017 8:56 pm

I earn 177k and she earns 350K. I am not complaining, however I am deeply troubled by the fact that when we filed jointly last year for the first time, I was murdered in taxes. Would it make sense to file by myself? I asked my accountant and he said it was about the same. How can that be? Yes AMT got us. :confused

Mike Scott
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Re: Should I file taxes w/o her?

Post by Mike Scott » Thu Dec 07, 2017 8:59 pm

Run some simulations in your favorite tax software.

technovelist
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Re: Should I file taxes w/o her?

Post by technovelist » Thu Dec 07, 2017 9:00 pm

"Married filing separately" is by far the worst filing status in most cases.

So I don't think you can improve your situation significantly.

Other than by asking her to pay the extra taxes, of course. :D
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Gill
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Re: Should I file taxes w/o her?

Post by Gill » Thu Dec 07, 2017 9:06 pm

How did you figure you were murdered? Did you pro rate the tax between the two of you? Your income tax is affected by your wife’s income, but married filing separately is rarely the answer.
Gill

zz4
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Re: Should I file taxes w/o her?

Post by zz4 » Thu Dec 07, 2017 9:17 pm

Gill wrote:
Thu Dec 07, 2017 9:06 pm
How did you figure you were murdered? Did you pro rate the tax between the two of you? Your income tax is affected by your wife’s income, but married filing separately is rarely the answer.
Gill
I say murdered because I was used to paying an effective rate of about 17%. Last year it jumped to a little over 31%. Again, I am happy about the income but am looking to save on taxes. Also, I believe some of my deductions didn't count because we surpassed some income threshold. Also, I could swear I was subjected to some strange taxes I never heard of. Possibly, some Obama care extra tax....not certain though.

dbr
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Re: Should I file taxes w/o her?

Post by dbr » Thu Dec 07, 2017 9:18 pm

It sounds like you and your wife keep separate finances. I guess in that case you should file separately or you will resent "getting murdered."

But how do you divide up other expenditures and why couldn't you apportion the tax cost as well. As others are saying the total tax cost would normally be less by filing jointly.

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Re: Should I file taxes w/o her?

Post by jebmke » Thu Dec 07, 2017 9:20 pm

This is something that is deterministic. You can run the taxes both ways and prove to yourself which is best.

I have done hundreds of returns and can only recall three times when it made sense to file Married Filing Separately. In all three cases there were some odd circumstances and even then, it wasn't a huge difference in their favor to file separately.
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dbr
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Re: Should I file taxes w/o her?

Post by dbr » Thu Dec 07, 2017 9:23 pm

zz4 wrote:
Thu Dec 07, 2017 9:17 pm
Gill wrote:
Thu Dec 07, 2017 9:06 pm
How did you figure you were murdered? Did you pro rate the tax between the two of you? Your income tax is affected by your wife’s income, but married filing separately is rarely the answer.
Gill
I say murdered because I was used to paying an effective rate of about 17%. Last year it jumped to a little over 31%. Again, I am happy about the income but am looking to save on taxes. Also, I believe some of my deductions didn't count because we surpassed some income threshold. Also, I could swear I was subjected to some strange taxes I never heard of. Possibly, some Obama care extra tax....not certain though.
A simple solution to that is for your wife to quit her job and not bring home all that income. Another solution would be to increase charitable deductions. Yes, there are various break points where deductions or credits may go away and where extra taxes may be imposed. If you are concerned that you may not have maximally avoided tax costs it might be worthwhile to revisit the tax accountant for another look.

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Re: Should I file taxes w/o her?

Post by Gill » Thu Dec 07, 2017 9:26 pm

That’s the cost of marrying a spouse with a high income. Maybe she can reimburse you for the amount by which your taxes increased as a result of marrying her.

How did you apportion the total tax liability on the return you filed?
Gill

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Re: Should I file taxes w/o her?

Post by LadyGeek » Thu Dec 07, 2017 9:27 pm

This thread is now in the Personal Finance (Not Investing) forum (taxes).
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Nate79
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Re: Should I file taxes w/o her?

Post by Nate79 » Thu Dec 07, 2017 9:47 pm

Maybe she could pay you to do some chores around the house to even things out? Or perhaps an allowance?

Geeze.

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Re: Should I file taxes w/o her?

Post by sailaway » Thu Dec 07, 2017 9:53 pm

Some deductions are not available for married filing separately. The one I was concerned about when I checked was student loan interest, but it seems unlikely that would be the only one.

zz4
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Re: Should I file taxes w/o her?

Post by zz4 » Thu Dec 07, 2017 10:01 pm

I knew I wasn't going to get any sympathy but I wanted to see if there was a better way to avoid the high taxes. While our funds aren't in one pot, She has a golden heart and is extremely generous so I'll quit while I'm ahead, thank you! :happy

randomguy
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Re: Should I file taxes w/o her?

Post by randomguy » Thu Dec 07, 2017 10:05 pm

sailaway wrote:
Thu Dec 07, 2017 9:53 pm
Some deductions are not available for married filing separately. The one I was concerned about when I checked was student loan interest, but it seems unlikely that would be the only one.
The real killer is the brackets being different.He might end up paying less tax, but she will pay a lot more and the total amount of taxes paid by both of them are likely to be higher.

randomguy
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Re: Should I file taxes w/o her?

Post by randomguy » Thu Dec 07, 2017 10:08 pm

zz4 wrote:
Thu Dec 07, 2017 10:01 pm
I knew I wasn't going to get any sympathy but I wanted to see if there was a better way to avoid the high taxes. While our funds aren't in one pot, She has a golden heart and is extremely generous so I'll quit while I'm ahead, thank you! :happy
Other than getting divorced there is no good way for higher earning couples to avoid the marriage penalty. I am not sure how you are allocating taxes but your share shouldn't have gone from 17% to 31% unless you are doing something crazy (i.e. calculate her taxes and then add her income on top).

Katietsu
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Re: Should I file taxes w/o her?

Post by Katietsu » Thu Dec 07, 2017 10:18 pm

zz4 wrote:
Thu Dec 07, 2017 8:56 pm
I asked my accountant and he said it was about the same. How can that be?
Because married file separate is very different than single. Hence, the suggestion that a divorce is likely your only to get back to 17%.

TigerNest
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Re: Should I file taxes w/o her?

Post by TigerNest » Thu Dec 07, 2017 10:18 pm

If you are married, you are not allowed to file as 'Single.'

'Married Filing Separately' is not the same as filing as two single people. It is a separate category that is subject to significantly higher taxes in almost all cases. You're disqualified from a lot of credits.

Unfortunately there isn't really a way to get out of the 'marriage penalty.' I empathize -- our marginal tax rate is >50%. :-/

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Mlm
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Re: Should I file taxes w/o her?

Post by Mlm » Thu Dec 07, 2017 10:22 pm

I the 31% tax rate a combined marital rate? What was her rate previously? Compare taxes before you were married vs married and you may not be paying all that much more.
Reality has a way of catching up with you

zz4
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Re: Should I file taxes w/o her?

Post by zz4 » Thu Dec 07, 2017 10:22 pm

TigerNest wrote:
Thu Dec 07, 2017 10:18 pm
If you are married, you are not allowed to file as 'Single.'

'Married Filing Separately' is not the same as filing as two single people. It is a separate category that is subject to significantly higher taxes in almost all cases. You're disqualified from a lot of credits.

Unfortunately there isn't really a way to get out of the 'marriage penalty.' I empathize -- our marginal tax rate is >50%. :-/
Holy crap! :shock: :shock:

blastoff
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Re: Should I file taxes w/o her?

Post by blastoff » Thu Dec 07, 2017 10:30 pm

Find someone with a lot of debt and no income and they might decrease your taxes :)

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Re: Should I file taxes w/o her?

Post by jalbert » Thu Dec 07, 2017 10:31 pm

zz4 wrote:
Thu Dec 07, 2017 8:56 pm
I earn 177k and she earns 350K. I am not complaining, however I am deeply troubled by the fact that when we filed jointly last year for the first time, I was murdered in taxes. Would it make sense to file by myself? I asked my accountant and he said it was about the same. How can that be? Yes AMT got us. :confused
Was half of your combined after-tax income filing a joint married couple return more or less than your after-tax income when you were single?
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mhalley
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Re: Should I file taxes w/o her?

Post by mhalley » Thu Dec 07, 2017 10:36 pm

Seems like you are looking at this the wrong way. You say “I” got murdered, but you are married and I would imagine that you have a joint financial life. Are you saying that you had to pay the extra taxes out of your personal money? Perhaps you need to have a discussion about equitable distribution of expenses. Paying taxes is the price of having a terrific income.

harmony
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Re: Should I file taxes w/o her?

Post by harmony » Thu Dec 07, 2017 10:37 pm

In many states it is allowed to itemize deductions on the state Schedule A even if itemizing won't work on federal taxes. Usually the standard deduction for a state return is a much lower bar than the standard deduction for the federal return. In my state the standard deduction is about 1/3 of what the federal standard deduction is. In our state tax software, there is a separate state Schedule A which gets filled in with the state return and does not compute with or flow from the federal return. We are sometimes able to surpass the state standard deduction based on bunching property taxes and some other allowances. This often works better than MFS on our state return. But if you are already itemizing on both federal and state, this wouldn't be of any help, would it?

In Connecticut, Illinois, Indiana, Massachusetts, Michigan, New Jersey, Ohio, Pennsylvania, Rhode Island and West Virginia, the standard deduction is the only choice.

Source: https://ttlc.intuit.com/questions/30800 ... deductions

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unclescrooge
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Re: Should I file taxes w/o her?

Post by unclescrooge » Thu Dec 07, 2017 10:41 pm

randomguy wrote:
Thu Dec 07, 2017 10:08 pm
zz4 wrote:
Thu Dec 07, 2017 10:01 pm
I knew I wasn't going to get any sympathy but I wanted to see if there was a better way to avoid the high taxes. While our funds aren't in one pot, She has a golden heart and is extremely generous so I'll quit while I'm ahead, thank you! :happy
Other than getting divorced there is no good way for higher earning couples to avoid the marriage penalty. I am not sure how you are allocating taxes but your share shouldn't have gone from 17% to 31% unless you are doing something crazy (i.e. calculate her taxes and then add her income on top).
Of course his taxes went up. His household income went from 175k to 525k.

Other than divorce, the only option is to switch jobs and become a full-time real estate agent and investor. That way you can use the depreciation losses to your advantage without hitting income limits.

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ClevrChico
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Re: Should I file taxes w/o her?

Post by ClevrChico » Thu Dec 07, 2017 10:48 pm

Does your spouse need to increase their withholding possibly? Is that the problem?

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Epsilon Delta
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Re: Should I file taxes w/o her?

Post by Epsilon Delta » Thu Dec 07, 2017 10:50 pm

zz4 wrote:
Thu Dec 07, 2017 10:01 pm
I knew I wasn't going to get any sympathy but I wanted to see if there was a better way to avoid the high taxes. While our funds aren't in one pot, She has a golden heart and is extremely generous so I'll quit while I'm ahead, thank you! :happy
If you really keep separate finances the pair of you might want to consider how you allocate the taxes between the pair of you.

As a disinterested and completely anonymous third party I'd suggest generating "pro-forma" MFS returns for each of you and then allocating the MFJ taxes in proportion. E.g. If MFS1 is $25k MFS2 is $225k and MFJ is $240k then you would pay $240k * ( $25k / ($25k+$225) ) or $24k and she would pay $216k.

Disinterested and anonymous third party duties do not include bringing this to your wife's attentions, but what's the worst that could happen? You end up filing as single?

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Mlm
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Re: Should I file taxes w/o her?

Post by Mlm » Thu Dec 07, 2017 10:52 pm

If your taxes are causing a hardship you might want to look at cutting expenses. There are numerous threads about how to do this. You could start by looking at your cell phone bills or Netflix expenses. Aldi and Costco can save you a lot on your food bills. If you live in a HCOL I have heard that relocating could save you a bunch too.

I've been in your shoes and its not fun. Good luck
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Re: Should I file taxes w/o her?

Post by IGWT » Fri Dec 08, 2017 12:13 am

If you want to be married, keep the same income level, but avoid AMT (after all allowable deductions, tax saving strategies), I feel you are cying to pay your fair share!

At 177k filing single, if your effective tax rate was just 17%, it means you are tax efficient.

One idea is to to relocate to some place where there are less taxes or no taxes, like the middle east, else pay your fair share.

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Pajamas
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Re: Should I file taxes w/o her?

Post by Pajamas » Fri Dec 08, 2017 12:35 am

Let your wife bring home the bacon for you to fry. Have a kid, quit your job, stay home to raise the child and keep house. Problem solved! :beer

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Re: Should I file taxes w/o her?

Post by celia » Fri Dec 08, 2017 12:36 am

It looks like your average salary is now $263.5K. This is the same as if you got a big raise and she changed to part time. If you were still Single and your wages were $263.5K, would you be complaining about the tax bill?

Have the two of you talked about your upcoming tax return(s)? Have you seen each others' from last year? Make sure you have enough withheld or send in estimated taxes to avoid the under-withholding penalty.

Smile :D You're in a better financial state than you were a year earlier.

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Re: Should I file taxes w/o her?

Post by mouses » Fri Dec 08, 2017 12:44 am

sailaway wrote:
Thu Dec 07, 2017 9:53 pm
Some deductions are not available for married filing separately. The one I was concerned about when I checked was student loan interest, but it seems unlikely that would be the only one.
I believe that's one of the things going away. I guess it's okay to comment in that since both houses have passed the tax bill and are just ironing out differences. For me, filing single, everything on Sched. A will vanish except charitable deductions and the tiny state income tax. Personal exemptions and dependent exemptions are vanishing as well.

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Re: Should I file taxes w/o her?

Post by TwstdSista » Fri Dec 08, 2017 3:57 am

zz4 wrote:
Thu Dec 07, 2017 10:01 pm
I knew I wasn't going to get any sympathy but I wanted to see if there was a better way to avoid the high taxes. While our funds aren't in one pot, She has a golden heart and is extremely generous so I'll quit while I'm ahead, thank you! :happy
Laughing -- good deal!

Something similar happened to me the first year my husband and I were married. I did our taxes and called him at work in a panic. How the heck can we owe $1400?? (a much bigger deal in our finances back then) Freaked me out! But we adjusted our individual withholding numbers and now we have a much better feel for our tax situation. I actually do our taxes periodically throughout the year to avoid surprises.

dbr
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Re: Should I file taxes w/o her?

Post by dbr » Fri Dec 08, 2017 9:12 am

ClevrChico wrote:
Thu Dec 07, 2017 10:48 pm
Does your spouse need to increase their withholding possibly? Is that the problem?
The problem is between the two of them the tax bill is a lot higher than it was for him alone because the total income is now much higher. So the question to ask is whether or not they are doing the right thing between filing jointly or married filing separately. The answer appears to be that the taxes are correct and that filing jointly is better than MFS. The rest of the discussion seems to be some kind of upset over having to pay a lot of tax on a lot of income and as yet unexplained issues about how this couple divides up financial accounts, the problem being that a joint filing imposes a joint expense that seemingly needs to be divided up somehow. But I don't think the upset is the question; it is just what is the best way to file.

randomguy
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Re: Should I file taxes w/o her?

Post by randomguy » Fri Dec 08, 2017 9:45 am

unclescrooge wrote:
Thu Dec 07, 2017 10:41 pm
randomguy wrote:
Thu Dec 07, 2017 10:08 pm
zz4 wrote:
Thu Dec 07, 2017 10:01 pm
I knew I wasn't going to get any sympathy but I wanted to see if there was a better way to avoid the high taxes. While our funds aren't in one pot, She has a golden heart and is extremely generous so I'll quit while I'm ahead, thank you! :happy
Other than getting divorced there is no good way for higher earning couples to avoid the marriage penalty. I am not sure how you are allocating taxes but your share shouldn't have gone from 17% to 31% unless you are doing something crazy (i.e. calculate her taxes and then add her income on top).
Of course his taxes went up. His household income went from 175k to 525k.

Other than divorce, the only option is to switch jobs and become a full-time real estate agent and investor. That way you can use the depreciation losses to your advantage without hitting income limits.
I think the debate is more about his share of the taxes. Imagine the situation (pretty made up numbers) was something like

a) he mades 150k and pays 30k in taxes
she makes 350k and pays 150k in taxes
total taxes = 180k

b) they get married and have 500k of income and pay 200k of taxes

What should his share of the extra 20k be? The way a lot of people go would be he pays 30k+ 20k*(150/500) = 36k. Or his percentage goes from 20% to 24%. Even if you split the extra taxes evenly (40/150k) you are only looking at 27%.


Now maybe he is prorating taxes by income (200k*150/600k = 60k for him and 140k for her ), he is using a flawed system. I don't think anyone would think giving the high earner a tax break and sticking the low earner with more taxes is remotely fair.

Splits like this are one of the things you need to deal with when you keep finances separate since you can't really your finances 100% separate.

zz4
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Re: Should I file taxes w/o her?

Post by zz4 » Fri Dec 08, 2017 10:07 am

TwstdSista wrote:
Fri Dec 08, 2017 3:57 am
zz4 wrote:
Thu Dec 07, 2017 10:01 pm
I knew I wasn't going to get any sympathy but I wanted to see if there was a better way to avoid the high taxes. While our funds aren't in one pot, She has a golden heart and is extremely generous so I'll quit while I'm ahead, thank you! :happy
Laughing -- good deal!

Something similar happened to me the first year my husband and I were married. I did our taxes and called him at work in a panic. How the heck can we owe $1400?? (a much bigger deal in our finances back then) Freaked me out! But we adjusted our individual withholding numbers and now we have a much better feel for our tax situation. I actually do our taxes periodically throughout the year to avoid surprises.
Great point....I'll need to check the withholding.

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JDCarpenter
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Re: Should I file taxes w/o her?

Post by JDCarpenter » Fri Dec 08, 2017 10:07 am

Pajamas wrote:
Fri Dec 08, 2017 12:35 am
Let your wife bring home the bacon for you to fry. Have a kid, quit your job, stay home to raise the child and keep house. Problem solved! :beer
This worked well for us and cut out a lot of expenses (from nanny to electricians/plumbers). Delayed retirement for a few years, probably--but I had a nice 15-year break from full time legal work while raising the three kids, half-time teaching, housekeeping, and doing our own construction and repair work. DW, OTOH, was able to focus on her profession with little in the way of distractions.

With two high, but disparate, incomes, the lower earning partner might be surprised after running the numbers when/if kids are involved. (Assuming with those incomes you neither one have weekends off or anything like an 8-10 hour day, which was a major factor....)

But otherwise, you are in the sweet spot for marriage penalty and have no real out under present tax laws.
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dbr
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Re: Should I file taxes w/o her?

Post by dbr » Fri Dec 08, 2017 10:10 am

zz4 wrote:
Fri Dec 08, 2017 10:07 am
TwstdSista wrote:
Fri Dec 08, 2017 3:57 am
zz4 wrote:
Thu Dec 07, 2017 10:01 pm
I knew I wasn't going to get any sympathy but I wanted to see if there was a better way to avoid the high taxes. While our funds aren't in one pot, She has a golden heart and is extremely generous so I'll quit while I'm ahead, thank you! :happy
Laughing -- good deal!

Something similar happened to me the first year my husband and I were married. I did our taxes and called him at work in a panic. How the heck can we owe $1400?? (a much bigger deal in our finances back then) Freaked me out! But we adjusted our individual withholding numbers and now we have a much better feel for our tax situation. I actually do our taxes periodically throughout the year to avoid surprises.
Great point....I'll need to check the withholding.
Why? Withholding affects how much you have to pay in with the tax return but not what the tax cost is. In the above post "owe" refers to how much had to be sent in with the return and not with the total tax owed. I hope no one here is imagining that tax withholding means you get free money.

LK2012
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Re: Should I file taxes w/o her?

Post by LK2012 » Fri Dec 08, 2017 10:24 am

dbr wrote:
Fri Dec 08, 2017 10:10 am
zz4 wrote:
Fri Dec 08, 2017 10:07 am
TwstdSista wrote:
Fri Dec 08, 2017 3:57 am
zz4 wrote:
Thu Dec 07, 2017 10:01 pm
I knew I wasn't going to get any sympathy but I wanted to see if there was a better way to avoid the high taxes. While our funds aren't in one pot, She has a golden heart and is extremely generous so I'll quit while I'm ahead, thank you! :happy
Laughing -- good deal!

Something similar happened to me the first year my husband and I were married. I did our taxes and called him at work in a panic. How the heck can we owe $1400?? (a much bigger deal in our finances back then) Freaked me out! But we adjusted our individual withholding numbers and now we have a much better feel for our tax situation. I actually do our taxes periodically throughout the year to avoid surprises.
Great point....I'll need to check the withholding.
Why? Withholding affects how much you have to pay in with the tax return but not what the tax cost is. In the above post "owe" refers to how much had to be sent in with the return and not with the total tax owed. I hope no one here is imagining that tax withholding means you get free money.
Well, I took that to mean he was going to see whether his wife could increase her withholding so she would pre-pay more of the tax, no? Since the issue appears to be that he is getting murdered on taxes now that they are married and filing jointly, maybe the tax due when the return was completed was a big part of the surprise and pain? In any case, figuring out what is separate and what is joint, and who is paying for what, would be very important at this stage of life. Resentments and score-keeping can just grow and fester if there isn't some clarity generated now. Just a suggestion. Time has a way of magnifying those things. Good luck.

dbr
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Re: Should I file taxes w/o her?

Post by dbr » Fri Dec 08, 2017 10:30 am

LK2012 wrote:
Fri Dec 08, 2017 10:24 am
dbr wrote:
Fri Dec 08, 2017 10:10 am
zz4 wrote:
Fri Dec 08, 2017 10:07 am
TwstdSista wrote:
Fri Dec 08, 2017 3:57 am
zz4 wrote:
Thu Dec 07, 2017 10:01 pm
I knew I wasn't going to get any sympathy but I wanted to see if there was a better way to avoid the high taxes. While our funds aren't in one pot, She has a golden heart and is extremely generous so I'll quit while I'm ahead, thank you! :happy
Laughing -- good deal!

Something similar happened to me the first year my husband and I were married. I did our taxes and called him at work in a panic. How the heck can we owe $1400?? (a much bigger deal in our finances back then) Freaked me out! But we adjusted our individual withholding numbers and now we have a much better feel for our tax situation. I actually do our taxes periodically throughout the year to avoid surprises.
Great point....I'll need to check the withholding.
Why? Withholding affects how much you have to pay in with the tax return but not what the tax cost is. In the above post "owe" refers to how much had to be sent in with the return and not with the total tax owed. I hope no one here is imagining that tax withholding means you get free money.
Well, I took that to mean he was going to see whether his wife could increase her withholding so she would pre-pay more of the tax, no? Since the issue appears to be that he is getting murdered on taxes now that they are married and filing jointly, maybe the tax due when the return was completed was a big part of the surprise and pain? In any case, figuring out what is separate and what is joint, and who is paying for what, would be very important at this stage of life. Resentments and score-keeping can just grow and fester if there isn't some clarity generated now. Just a suggestion. Time has a way of magnifying those things. Good luck.
OK I get that idea now. I have always looked on withholding vs tax due as kind of a no brainer that people can't not understand. He didn't say it was about tax due as opposed to total tax. The OP has still not really explained what the problem really is aside from that he just never guessed that lots of income means lots of tax, and the forum can't help with a relationship problem, if that is even what it is.

Ace1
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Re: Should I file taxes w/o her?

Post by Ace1 » Fri Dec 08, 2017 11:22 am

My perception of the OP’s question is simply will MFS produce a lower tax bill than MFJ.
When he was single he was in the 28% bracket with an effective rate of 17%, and probably withheld accordingly.
When he married, the huge jump in combined income and the resulting tax bracket jump, his income now became subject to a much higher RATE (39.6% bracket, effective 28%), which he did not anticipate and probably did not adjust his withholding for.
The OP should either put all his numbers into tax software himself ( since he did not provide them here), or return to the accountant and go through the details of MFJ vs MFS.
The liklihood is, and my past experience is, MFS in most every case (there are very few exceptions for instance revolving around itemized deduction items where agi thresholds are involved) will NOT produce a more favorable overall federal tax result, and in addition, a number of items are lost or treated more harshly under MFS than MFJ.
The exception here is if the OP lives in a state where it MIGHT be possible the cumulative taxes of both federal and state combined could be less overall, but the only way to know is to run all the numbers.
This is of course under current tax rules.
The OP is already likely doing things to reduce taxable income such as HSA and 401k etc., so all other things being equal, both his spouse and himself should modify their respective payroll tax withholding in some equitable fashion.

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Epsilon Delta
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Re: Should I file taxes w/o her?

Post by Epsilon Delta » Fri Dec 08, 2017 12:48 pm

One issue with withholding is that a W-4 (and equivalent electronic tools) suggest that all allowances be claimed by the highest earning spouses W-4. This does result in the most accurate withholding, but it is best considered as a matter between the couple and the IRS NOT a way to allocate tax payments with the couple if they choose to have separate finances.

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unclescrooge
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Re: Should I file taxes w/o her?

Post by unclescrooge » Fri Dec 08, 2017 1:10 pm

randomguy wrote:
Fri Dec 08, 2017 9:45 am
unclescrooge wrote:
Thu Dec 07, 2017 10:41 pm
randomguy wrote:
Thu Dec 07, 2017 10:08 pm
zz4 wrote:
Thu Dec 07, 2017 10:01 pm
I knew I wasn't going to get any sympathy but I wanted to see if there was a better way to avoid the high taxes. While our funds aren't in one pot, She has a golden heart and is extremely generous so I'll quit while I'm ahead, thank you! :happy
Other than getting divorced there is no good way for higher earning couples to avoid the marriage penalty. I am not sure how you are allocating taxes but your share shouldn't have gone from 17% to 31% unless you are doing something crazy (i.e. calculate her taxes and then add her income on top).
Of course his taxes went up. His household income went from 175k to 525k.

Other than divorce, the only option is to switch jobs and become a full-time real estate agent and investor. That way you can use the depreciation losses to your advantage without hitting income limits.
I think the debate is more about his share of the taxes. Imagine the situation (pretty made up numbers) was something like

a) he mades 150k and pays 30k in taxes
she makes 350k and pays 150k in taxes
total taxes = 180k

b) they get married and have 500k of income and pay 200k of taxes

What should his share of the extra 20k be? The way a lot of people go would be he pays 30k+ 20k*(150/500) = 36k. Or his percentage goes from 20% to 24%. Even if you split the extra taxes evenly (40/150k) you are only looking at 27%.


Now maybe he is prorating taxes by income (200k*150/600k = 60k for him and 140k for her ), he is using a flawed system. I don't think anyone would think giving the high earner a tax break and sticking the low earner with more taxes is remotely fair.

Splits like this are one of the things you need to deal with when you keep finances separate since you can't really your finances 100% separate.
Ah, I misunderstood....it seems strange to me that this would be a surprise. I would've thought it obvious.

thangngo
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Re: Should I file taxes w/o her?

Post by thangngo » Fri Dec 08, 2017 1:27 pm

zz4 wrote:
Thu Dec 07, 2017 8:56 pm
I earn 177k and she earns 350K. I am not complaining, however I am deeply troubled by the fact that when we filed jointly last year for the first time, I was murdered in taxes. Would it make sense to file by myself? I asked my accountant and he said it was about the same. How can that be? Yes AMT got us. :confused
Are you and her married? She'll get AMT for sure.

1) Might be open a business and spend capital expenditure? You can still take 50% bonus this year and/or Section 179.
2) Get divorced on paper and file separate single return.
3) File joint return and pay up the tax. Unless your income is fairly similar, I find it hard to get any tax benefits to file married separately.

barnaclebob
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Re: Should I file taxes w/o her?

Post by barnaclebob » Fri Dec 08, 2017 1:31 pm

zz4 wrote:
Thu Dec 07, 2017 8:56 pm
I earn 177k and she earns 350K. I am not complaining, however I am deeply troubled by the fact that when we filed jointly last year for the first time, I was murdered in taxes. Would it make sense to file by myself? I asked my accountant and he said it was about the same. How can that be? Yes AMT got us. :confused
How do you know you didn't take up all of her lower tax bracket space? Money is fungible.

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greg24
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Re: Should I file taxes w/o her?

Post by greg24 » Fri Dec 08, 2017 1:33 pm

unclescrooge wrote:
Thu Dec 07, 2017 10:41 pm
Of course his taxes went up. His household income went from 175k to 525k.
+99999999999999999999999999999

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avenger
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Re: Should I file taxes w/o her?

Post by avenger » Tue Dec 12, 2017 2:13 pm

This is one of the reasons my partner and I of 10 years don’t marry.
cheers ... -Mark | "Our life is frittered away with detail. Simplify. Simplify." -Henry David Thoreau | [3 fund portfolio: VTI, VXUS, SV fund (yield 3.01%)]

bikechuck
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Re: Should I file taxes w/o her?

Post by bikechuck » Tue Dec 12, 2017 9:09 pm

technovelist wrote:
Thu Dec 07, 2017 9:00 pm
"Married filing separately" is by far the worst filing status in most cases.

So I don't think you can improve your situation significantly.

Other than by asking her to pay the extra taxes, of course. :D
Be careful with your advice.

In Ohio, for state taxes, the joint filing credit is low and the tax rate schedule is graduated. My wife and I saved tens of thousands of dollars over the past 25 years by choosing to file "married filing separately".

You really cannot generalize about this, each year I tried our returns jointly and filing separately and each year we benefited by filing separately. This is about to change in 2018 as we retired in 2017.

zz4
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Re: Should I file taxes w/o her?

Post by zz4 » Tue Dec 12, 2017 9:11 pm

avenger wrote:
Tue Dec 12, 2017 2:13 pm
This is one of the reasons my partner and I of 10 years don’t marry.
You are certainly correct on that point!

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Dendritic Tree
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Re: Should I file taxes w/o her?

Post by Dendritic Tree » Tue Dec 12, 2017 9:59 pm

sailaway wrote:
Thu Dec 07, 2017 9:53 pm
Some deductions are not available for married filing separately. The one I was concerned about when I checked was student loan interest, but it seems unlikely that would be the only one.
They are way beyond phased out of being able to claim the student loan interest deduction. Even individually, if they were to file as single.

Gnirk
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Re: Should I file taxes w/o her?

Post by Gnirk » Tue Dec 12, 2017 10:11 pm

We also have a great disparity in income, and I am the one with the less income. However, our CPA files our taxes Married Filing Jointly, and then also computes them individually-strictly informational. Each time I would have had a refund coming and DH would have had to pay significantly more taxes. So I pay proportionately more taxes than DH, but he pays more of our expenses, so I would be a fool to complain.

My brother and his wife apportion their taxes according to each of their incomes as a percentage of the whole.

BTW, both are second marriages.

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