Back in my grandmother’s childhood, marriage was very important. If you were not married by a certain age you where looked down on, considered an old maid. In today’s world, many feel that marriage is a piece of paper. Not a deciding factor on how in love with a person you are. Many couples decide to live together for years before marriage even becomes a topic of discussion.
It is important that we are educated and knowledgeable about aspects of marriage before we decide to take the plunge. However, when deciding whether to get hitched or not I bet no one thought of the tax implications marriage could have. One that many people are unaware of is the Obamacare tax credits.
In the United States there is something called a “marriage penalty”, since 1971 this penalty has forced married couples to pay more in taxes than people who were not married. This means that married couples making 400,000 a year could save 27,000 annually if they decided to divorce and file separately. Who would have thought that marriage would still be costing us money after the I Do’s where done!
Even though, Obamacare insurance tax credit and subsidies are taking effect and the tax credits are not something to be taken lightly. This means that there is an even greater marriage tax as a result of the Affordable Care Act. This tax credit is not based on assets but instead taxable income. This makes it easy for even the wealthy clients to qualify for the Obamacare tax credit.
If you are not married the subsidies range from 0 to around 7,840 per year for someone with less than 46,000 dollars in taxable income at 62 years old. For a married couple however, the subsidy is around 11,000 dollars but the couple would be disqualified if their income is more than $62,041.”
This raises an issue for the couples who are earning at or somewhere near the cutoff level. If they reduce taxable income that could help, or they could divorce and file separately. If they took the divorce path they would save 11,028 dollars per year or about 900 dollars per month. However this is only if they make under $46,000 on an individual basis.
So how do you know which option is best for you and your family?
If you want to see for yourself CLICK HERE for the marriage bonus and penalty tax calculator.
But the best course of action is to discuss your questions and concerns with your financial advisor.