how does “getting married for tax purposes” work
In: Economics
Here is a simple example with made up numbers. Jamie makes $100. Pat makes $10. Government says you don’t pay taxes on your first $25 of income. We will simplify taxes to a 20% tax rate for this example.
If not married, Jamie owes taxes on $75 ($100-$25=$75). Jamie pays $15 in taxes (20% of $75), and ends up with $85 ($100-$15) in the end. Pat pays no taxes on $10 sincr it is less tgan $25 and ends up with $10 in the end. So, between Jamie and Pat, they have $95 total in the end ($85+$10=$95)
Being married, Jamie and Pat add their incomes together and don’t pay taxes on the first $50. They make $110 together and owe taxes on $60 ($110-$50=$60). They pay $12 (20% of $60) in taxes. So they end up with $98 ($110-$12) in the end, which is $3 more than they had not being married.
Latest Answers