Finance and capital markets
- Basics of US income tax rate schedule
- Tax deductions introduction
- AMT overview
- Alternative minimum tax
- Estate tax introduction
- Tax brackets and progressive taxation
- Calculating state taxes and take home pay
- Marriage penalty
- Married taxes clarification
Married taxes clarification
Created by Sal Khan.
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- if in a couple only one person earn then what the case would be ?(17 votes)
- In a one income family, the family could move slower or avoid the upper tax brackets by filing jointly. This would give them a significant tax savings.(30 votes)
- In what case does it save you money being married? Only when one person make the vast majority of the income?(9 votes)
- If one person makes the vast majority of the income, then the combined income (close to majority earner's income) will move slower through the tax brackets when filing as married than filing separately (the tax brackets when filing as married are about twice as much)(12 votes)
- So if you're married, why file separately instead of jointly if the final cost you're going to pay as a couple is the same? Does this situation where the end cost is the same separately or jointly only apply when you and your significant other are making approximately the same amount as in the marriage penalty video?(6 votes)
- Married filing separately is beneficial when it comes to Itemized deductions. Certain deductions like Health care expenses have limit you have to meet before you can start claiming it. I believe it is 7%. So if one of the couple had a rough year with medical costs, they might not have met 7% of the combined income; but when viewed against their own income this becomes a significant adjustment. In this situation you would then pile on other deductions (mortgage interest, charitable contributions, etc) and maximize the deductions on one set of income.(16 votes)
- It seems strange to me, not being from the States, to have a tax that discourages marriage. Do married couples pose a greater expense for the Government o why do these penalties exist? Government does not want any more children?(5 votes)
- If you watch the earlier video, Sal explains how the it's only a penalty in certain scenarios - specifically, if you and your spouse have roughly the same income. If you have very different incomes (most commonly, if you work but your spouse is stay-at-home), it is actually a bonus, because the married tax brackets are spaced further apart.
Basically, the tax code penalizes marriages between equal income earners and rewards the more traditional breadwinner/homemaker family structure. It's up to you whether you think that's a good thing or a bad thing.(9 votes)
- If your divorced does the marriage penalty automatically stop and you start paying iindividual taxes.(4 votes)
- I think that if one is divorced, then you are not legally considered married, and so you would have to file under individual.(6 votes)
- How do taxes work in a family with only one income?(2 votes)
- So if they're really hard pressed for money, couldn't a couple just skip marriage altogether and file as individuals?(2 votes)
- Yes, but that doesn't always make them better off (it depends on how much each one earns) and most people would not say that taxes are the most important criteria in making a decision about marriage.(3 votes)
- What should I do if I don't want my taxes being taken out right away? What should I write on W-4 form? Or let's say person made less than $8000, and the taxes have been taken out anyway, what this person should do to avoid this?(2 votes)
- The law requires you to have taxes withheld according to prescribed formulas. You should fill out the W-4 accurately, according to the instructions that come with it. The W-4 includes directions for determining whether you are "exempt", in which case you write the word "exempt" on the right line.
- okay so you pay these taxes every year and a majority of these taxes are taken out for every pay check. We know this. How is it determined how much you owe or get back after filing? I know it depends on deductions, etc but could you explain that better?(2 votes)
- You take the amount of money that was withheld. You subtract what you owe in taxes. Whatever is left is your refund. Not complicated.(2 votes)
- if u file separate isn't that more for both?(2 votes)
Want to make a few clarifications on the video on the marriage penalty. The first is to point out a minor arithmetic error is that when I calculated the amount of taxes to pay on this bracket, so the 15% of the increment between 17,850 and 72,500, that is actually 8,198 and since that was 8,198 this right over here would have been $10 higher. So it's 43,466. It doesn't change at all the ideas. It's actually a small amount of money in the whole context of things, but I just wanted to get the math a little bit more correct, but you still see that you have a marriage penalty. But the more important thing that I want to clarify is I saw in the discussion on the marriage penalty videos, some people saying, "Okay, fine. If it costs more to file married jointly," "well, why don't those people just opt to file as individuals" "and then they'd just have to pay this right over here" "and they could essentially opt out of the marriage penalty." And I want to clarify is that is not an option. If you are married, you don't use the pure individual tax schedule. You don't use this over here. Instead, if you are married but you want to file separate, you use the married filing separate tax schedule and you see in this, that this is ... this is exactly ... it's different ... It's the same as the individual tax schedule up until in these first three brackets, but then as we go above that bracket, it gets into the higher tax rates faster than the individual ones and it does it ... If you look at these brackets here, you see that they're exactly half the brackets of the married filing jointly and that's because, at least for this couple right over here, that's making identical incomes, they're going to pay the exact same amount, taking into account some roundoff error, for married filing separate as they are married filing jointly. And we can go through that exercise. So each of them had 100,000 in taxable income and in Couple A example that I gave and so the first 10 per or the first 8,925 they're going to pay 10%. That's just rounding. That's 890 ... 893, actually I could even say 892.5 if I want. 892.5 is 10% of that. Then on the next bracket, they're going to pay 15%. So that is $4,099 ... $4,099. And then on the next bracket, they're going to pay 25%. So 25% of this right over here, actually I think I rounded this number, but we'll take into consideration a little round off error. So 9, 238 and then they're going to pay 28% ... 28% on the increment ... The increment above 73,200. So they each have 100,000 ... 1,2,3 in taxable income. Subtract 73,000, 200 from that and they're paying 28% on it and this gets us, each of them having to spend 20 or have to pay 21,733.5 in taxes. If we combine the two for both parties to the couple, we have 43,467 ... 43,467 which is essentially the same as if they would have had to file jointly, the difference between the 6 or the 7 that's just because of some of the round off right over here, but they had to pay the functionally equivalent tax rate. So just to be clear, if you are married you either have to do married filing jointly, married filing separate. There's also a separate head of household, but you do not have the option of filing under an individual, so you can't just opt out of the marriage penalty, if it happens to exist for the scenario that you happen to fall into.