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Friday, April 21, 2017

You Have Until December 31 to Get Married

Unless you want the government to keep stealing as much of your money as possible, in which case, carry on.

We all did our taxes painfully recently, and we’re all still reeling from the numbers. If you were feeling cynical you may even have figured out how much you make every year post-tax, in which case you’re probably still in shock. (And if that gave you the bright idea of going to do that just now, my sympathies.) We’re all here thinking, “There has got to be a way to make this better.”

If you’re single, there is: get married.

Leaving out the emotions involved with being married, and besides the obvious financial benefits like having two people pay for one rent, one set of utilities, etc, being married saves you so much money in taxes that I think the government has a vendetta against single people. Maybe they’re trying to incentivize us to get married so we can churn out babies who will then continue to pay even more taxes. Maybe the government is classist. I don’t know. But whatever the motivation, it is financially awful to be single. So we should all probably get married by December 31, the last day things can count for tax-filing.

Single, Filing Separately

There’s not a lot you can do other than not earning a lot in the first place. Which doesn’t really help either.Because the government wants to rub your #ForeverAlone status in your face as much as possible, they make you say you’re single twice: yes, I am single. Yes, I am filing my taxes alone. Because it’s just me. By myself. Alone.

As you know, when you are single, the government takes a ridiculously large percentage of your earnings away from you and gives you a certain amount back. Unless they decide to take even more. There’s a “standard deduction” which decreases the amount of income the government is allowed to tax, and that depends on your filing status. Besides your standard deduction, you can claim things like charitable donations, student loan interest payments, and car loans on your taxes and get that money back, but that’s about it. In the end, there’s not a lot you can do to avoid shelling out a sizable chunk of your income – unless you’re insane about paying off your student loan interest, assuming you have any – other than not earning a lot in the first place. Which doesn’t really help things either, because then you’re just broke (broke-er).

Married, Filing Jointly

So what happens when you get married and can “file jointly”?

First of all, it means you only have to do one set of taxes each year, instead of both of you doing your own. Filing jointly means the government lumps your two incomes together (assuming you’re both working), and taxes the whole as one thing. Does that push you up into a higher tax bracket, penalizing you for successfully getting married? Probably. 28% is more than the 25% you’d pay if you were single, but you still have the money of two incomes, so in the end it’s more money.

Then there’s the itemizing. Itemizing is where you say “No, I do not want the standard deduction, I want to claim a bunch of things instead because that gets me more money back.” These are expenses that can be subtracted from your total income, which decreases your taxable income, which decreases the taxes you owe, which increases your tax return.

Going from a 25% bracket to a 28% is worth it when you have two incomes to pay that extra 3%.The reason you can claim more things is that you have more money to spend on things eligible for claiming. When you’re married, you suddenly have more money because there is two of you, and that means two incomes plus the “filing jointly” effectively lower tax rate. So with all this money lying around you can do things like buy a new car that isn’t dying, get a mortgage, work from home, and have medical and dental procedures done. You get to claim all those things on your taxes and get the money back.

So, not only do you have two incomes and an effectively lower tax rate, but you also get more money back in the first place.

Infuriating, yes?

The Rich Get Richer, and You Can’t Come

So what’s the tax timeline for what happens when you get married?

On your first Tax Day together (how romantic), you file one set of taxes instead of two. You say you’re “Married, filing jointly.” You claim as much as you can from your wedding. Then when you get your tax return, you marvel at all the money you’ve been sent back and decide to save a lot of it because, now that there’s two of you in one apartment, you don’t need your return to pay rent anymore like you used to.

After a few years of this, you’ve saved up enough money for a down payment on a house. You get a mortgage and for the next 15 years or so you get to claim all that money on your taxes, so you get even more money back. This cycle of “spending to save” continues and you get a new car, which you also claim, and then maybe you have a kid or two or five, and you get to claim all of them on your taxes too.

At some point, you make/have enough money to be able to work from home without worrying about being fired, and you get to claim your designated office space on your taxes as well. All this time, you’ve been deducting medical and dental costs for you and your family, too. And so your money keeps building while your poor single friends are back where always have been, even with their job Even though you’re half a couple, you don’t get to pay half of the “Married, Filing Jointly” tax rate. You still have to pay 89% of it.promotions and raises, because they’re paying so much in taxes. Poor souls.

But until that idyllic fairytale is a reality, you don’t get to claim rent on your tax return, even though these days rent is often as expensive as a mortgage. Your Obviously First Car payments aren’t as big as Shiny Real Adult Car payments, which means you claim less on your cheaper car, and paying it off still hurts more because you’re poor. You can’t claim your actual office workspace on your return. You can claim your medical and dental expenses as deductions, but that probably isn’t enough to get you more than your standard deduction would, so you just stick with that. Even though you’re half a couple, you don’t get to pay half the “Married, Filing Jointly” tax rate. Nope, you still have to pay about 89% of it. Fun, isn’t it?

Because you’re paying more in taxes and getting relatively less back in your return every year, you have less total money, which means it’s increasingly difficult to save money in order to launch yourself into the Claim My Mortgage level of taxpayers by buying a house. So the vicious cycle continues until you either make so much money by yourself that even the tax rate can’t stop you, or you get married. That’s about it.

Get Hitched Already

So if you’ve been putting off a wedding because you want to wait until you have more money, don’t bother. You’re actually losing money by waiting. Just elope or something, that’s super cheap. My mom says so.

In the meantime, I have a pact with a friend that if we’re both single at the age of 40, we are giving up the hunt and getting married to each other strictly for tax purposes. We will be completely platonic, each with our own room, doing our own thing, but we want the tax benefits of saying “Married, Filing Jointly” on our taxes, dammit.

If you want more time to get married than what’s left between now and the last day of the year, find someone you wouldn’t kill if you roomed together, and form a Tax Pact. You can spend your saved tax money on vacations away from your Pact Person. Otherwise, I will see you at your New Year’s Eve wedding.