THE MARRIAGE PENALTY A single man with an adjusted income of...

THE MARRIAGE PENALTY A single man with an adjusted income of $\$ 80,000$ is dating a single woman with an adjusted income of $\$ 75,000$. a. Find the amount of federal income tax each person would pay on their adjusted income. b. Add the results from part a. c. If they get married and file a joint return, how much federal income tax will they have to pay on their combined adjusted incomes? d. Would they have saved on their federal income taxes if they did not get married and paid as two single persons? Find the amount of the "marriage penalty." CAN'T COPY THE TABLE

THE MARRIAGE PENALTY A single man with an adjusted income of $\$ 80,000$ is dating a single woman with an adjusted income of $\$ 75,000$.
a. Find the amount of federal income tax each person would pay on their adjusted income.
b. Add the results from part a.
c. If they get married and file a joint return, how much federal income tax will they have to pay on their combined adjusted incomes?
d. Would they have saved on their federal income taxes if they did not get married and paid as two single persons? Find the amount of the "marriage penalty."
CAN'T COPY THE TABLE

Key Concepts

Adjusted Income

Adjusted income, often referred to as adjusted gross income (AGI), is the amount of income remaining after specific deductions are applied to total income. It is a crucial figure used to determine how much income is taxable and plays a key role in calculating federal income tax liability.

Tax Brackets

Tax brackets are the ranges of income that are taxed at specific, progressive rates. In the context of federal income tax, different portions of an individual's or couple's income are taxed at different rates, which makes understanding these brackets essential for accurately computing tax liability.

Filing Status

Filing status, such as single or married filing jointly, determines the tax rates and the corresponding tax brackets that apply to an individual's or couple's taxable income. It directly affects the calculation of federal income taxes and can result in different liabilities depending on the status chosen.

Joint Return

A joint return is a tax filing status used by married couples who combine their incomes and deductions into a single tax return. This status can offer tax advantages or disadvantages compared to filing separately as individuals, and is a key factor in discussions of the marriage penalty.

Marriage Penalty

The marriage penalty refers to a situation where a married couple ends up paying more in taxes when filing jointly than they would if they were taxed as two single individuals. This occurs due to the structure of tax brackets and rates, and understanding it requires analyzing the impact of combining incomes on tax liability.

Transcript

00:01 Let's begin by finding out how much tax they would individually pay if they filed separately.

00:06 Let's start with the man.

00:08 He makes $80 ,000.

00:10 When we look at the line for taxes, we see that the base tax is $16 ,056 .25 for his income.

00:20 However, we also have to add on 28 % of the difference between what he has, which is $80 ,000, and the base rate, which is $78 ,850.

00:41 We need to take the difference here.

00:43 When we do, we get $1 ,150.

00:47 So we need to take 28 % of that number, $1 ,150, and add it to the base tax rate.

00:57 When we multiply this out, we get $322.

01:03 So we're really doing $16 ,056 .25, and 25 cents plus 320.

01:09 When you add that together, you get $16 ,378 .25.

01:21 So this is the amount for the man.

01:25 Now we have to look at the woman's income.

01:27 The woman is earning $75 ,000.

01:30 When we looks at our tax rates, we see that the base tax for this is $4 ,481 .25.

01:40 And onto that, we have to add 25 % of the difference between her income and our starting rate, which is 32 ,550.

01:52 So you have to do $75 ,000 minus $32 ,550.

02:02 The difference between these two numbers is rather large.

02:06 $42 ,450.

02:09 $50.

02:11 Luckily, however, we're not taking the entirety of that.

02:14 Instead, we're taking 25%.

02:16 Now, 25 % as a decimal is 0 .25, and we're going to multiply that by the difference that we just found.

02:23 So 42 ,450.

02:27 Now, 25 % of 42 ,450 is $10 ,612 .50.

02:37 So when we add that number to our starting amount, we get $15 ,093 .75...

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