Marriage/home tax benefits

**jIM_Ohio** · 12-04-2008, 06:30 PM

You are on the right track and asking good questions.

Use a website like this to get your numbers
Reference Room

If you are single and make 100k, you are taxed by doing the following:

100k gross
-5700 std deduction
-3650 personal exemption
90650 (look up on tax table for single or use reference room)

28%* (90650-82250)+16750= 19102 (this is the tax you owe).

For spouse
40k
-5700 std deduction
-3650 personal exemption
30650 (look up on tax table or go to reference room)
15%*(30650-8350)+835=$4180 total tax owed

4180 plus 19102 is 23000 tax owed between both of you being single.

If you were married the math is
140k
-11400 std deduction
-7300 (two exemptions)
121300 (look up on tax table or go to reference room)
25%*(121300-67900)+9350=22700 is the tax owed.

Getting married will usually help... because of your income differences (one at 28% bracket and one at 15%) it does help bring you into the 25% tax bracket, so you do see lower overall FEDERAL taxes ($300). If you were in higher tax brackets you might not see this benefit. My wife and I saw our tax drop considerably, but we were both in 25% bracket as single and then got into 15% bracket being married.

Mortgage interest- you only get a percentage of it back (not the whole thing).

Where I plugged in the STANDARD deduction above, you can replace that with ITEMIZED deductions which include mortgage interest. The way it works is you would claim all 18000 of mortgage interest which reduces TAXABLE INCOME. In effect if you take your tax percentage (28% when you are single or 25% if you are married) you would get that percentage of your interest back.

It may make sense to itemize if you file as married (because 18000>11400). In effect you are getting 25% of the 18000 ($4500) back. A smart person would change withholdings from one of the two jobs to get another $400 back per month (so you can use the cash every month and not get a large refund). You could add property taxes, state taxes (or sales taxes) to the 18k.

If you filed as single you could take the 18000 off your 100k income- the benefit here is two fold:
1) you would get 28% of the 18000 back instead of 25% filing a joint return
2) there might be a state benefit to filing seperately (there is a benefit to doing this in many cases within Ohio, but each state is different). Ohio uses a flat tax for state tax- it does not care about married, single or whatever. So 140k might get taxed at 4% ($5600) where as 100k gets taxed at 3.3% ($3300) and 40k gets taxed at 1.2% ($480). I am not sure of Ohio's specific limits for specific percentages, but hopefully you get the idea.

**the issue with #2 is the state refund needs to counter the increase in federal tax- your federal tax only changed by $300, so it will be easy for a state refund to counter this**

The downfall to this is if you are legally married and one spouse files as "married filing seperately", the other spouse must also file as MFS. In addition if using MFS and one spouse itemizes, the other spouse must also itemize. If a spouse has no itemized deductions, they get a "0" in that line to subtract from gross income.

The upside to this downfall is some things which might have not been deductable at 140k might be deductable at 40k on wife's return.

For example- medical expenses are deductable to point where they exceed 7.5% of your AGI. So your married AGI was 121300. 7.5% of this is $9000. I doubt you have 9k of medical expenses, so this deduction for you on a joint return is meaningless. But on your wife's MFS return the 7.5% floor is 7.5%*30650=$2300. Meaning if you had $2500 of medical expenses, you could deduct $2500-$2300=$200 of the expenses on the tax return.

Another pitfall of MFS is many tax credits and options go away. MFS cannot contribute to Roth IRA for example and cannot claim EIC for another example.

**Alex_Adviser** · 12-06-2008, 02:02 AM

HI there,

A very nice and detailed advice Jim. It will not only help jeebuss, but also many of us.Previously i used to think that filing taxes separately is a good idea, which is now being cleared completely by your post.

Thanks for the suggestions.

**jeebuss31** · 12-11-2008, 07:41 AM

Jim- Thanks for the breakdown!

So when are our house is completed in Jan 2009, should myself and future wife claim 2 on our paychecks? Can we exempt 3 or 4 without having to pay back IRS in 2010? We're not getting married until May2009, so I'm not sure how that would work. When we filed together for 2009 tax, should we claim marriage for only 6 months since we got married in the middle of 2009?

And lastly, what advice do you give for us if we want to max our monthly takehome without having to owe taxes the following year? I don't want the govt to keep any of my money

**Like2Plan** · 12-11-2008, 08:04 AM

Originally posted by jeebuss31 View Post

So when are our house is completed in Jan 2009, should myself and future wife claim 2 on our paychecks? Can we exempt 3 or 4 without having to pay back IRS in 2010?

I can answer this question. As with anything to do with taxes, there are too many variables. You should run your numbers through the IRS tax calculator in order to figure out your proper withholding. Here is a link: Link to IRS withholding calculator

We're not getting married until May2009, so I'm not sure how that would work. When we file together for 2009 tax, should we claim marriage for only 6 months since we got married in the middle of 2009?

The good news is you could wait all the way until 12/31/2009 to get married and your filing status would still be married for 2009.

**noppenbd** · 12-11-2008, 08:08 AM

Originally posted by jeebuss31 View Post

Jim- Thanks for the breakdown!

So when are our house is completed in Jan 2009, should myself and future wife claim 2 on our paychecks? Can we exempt 3 or 4 without having to pay back IRS in 2010? We're not getting married until May2009, so I'm not sure how that would work. When we filed together for 2009 tax, should we claim marriage for only 6 months since we got married in the middle of 2009?

And lastly, what advice do you give for us if we want to max our monthly takehome without having to owe taxes the following year? I don't want the govt to keep any of my money

EDIT: Like2Plan beat me to it...

If you are married on the last day of the calendar year then you are considered married for that tax year. So if you get married in May 2009, you should file as married for 09.

The IRS website has a pretty good calculator that lets you put in your 2 incomes, deductions, etc, and will tell you what to put on your W4 for that year. Here it is: IRS Withholding Calculator

Once you get the results you can double check by putting all your info into a paycheck calculator: PaycheckCity.com | Paycheck Calculator

You can get a pretty good ballpark number on your total taxes by using Jim's numbers above with your estimated interest, property, and state taxes. Compare this ballpark with what the IRS calculator is telling you. If they don't agree something is missing (either in your calculations or you entered something wrong on the IRS calculator). Also compare this with the withholdings from the paycheck calculator. If you get paid 26 times a year, the combination of your's and your wife's paycheck withholdings should be about 1/26 of total tax bill. The main thing is the total at the end of the year needs to be pretty close or you will owe in April, plus you can owe a penalty if you are too far below.

You can also check everything midway through the year and have more or less withheld if your estimates were wrong.

**Like2Plan** · 12-11-2008, 08:10 AM

Link to filing status

"Considered married. You are considered married for the whole year if on the last day of your tax year you and your spouse meet any one of the following tests.
1. You are married and living together as husband and wife. "

**loulou** · 12-15-2008, 02:49 PM

A benefit of filing MFJ instead of MFS in the situation you listed above is that you wouldn't be able to contribute to a Roth IRA if you filed MFS.

**shaneandnannda** · 12-31-2008, 03:24 PM

Tax questions for this last year

I am a newly married (Sept 8th) and having questions about how to file for taxes this year, I made just under 80,000 and my wife maid around 25,000 not sure if we should file separately or jointly, anyone with this experience and any knowledge I would appreciate some advice on how to proceed, thanks

- Shane

**shaneandnannda** · 12-31-2008, 03:39 PM

Let me clarify a little more I realized I was vague. I own a house with my brother worth 400.000 interest only, and we have renters paying us around 500 under what we owe each month. My wife and I are currently renting so not sure how to proceed with the house split evenly between my brother and I and not living there, as well as getting married in the last quarter of 2008. So any clarity and guidance would be great thanks.

**jIM_Ohio** · 12-31-2008, 04:28 PM

Originally posted by shaneandnannda View Post

I am a newly married (Sept 8th) and having questions about how to file for taxes this year, I made just under 80,000 and my wife maid around 25,000 not sure if we should file separately or jointly, anyone with this experience and any knowledge I would appreciate some advice on how to proceed, thanks

- Shane

Not enough info.

Easy way is go to turbo tax and run 3 returns (joint an both seperate). Make sure state returns are included in all 3 scenarios.

The see where biggest tax benefit is.

Or start another thread to discuss your situation.

Marriage/home tax benefits