For Most Couples, Marriage Is a Tax Bonus, Not a Penalty
Question: My fiancee and I will be married in June. Neither of us have been married, and we are curious whether we should file our taxes jointly or separately. My salary is $120,000 and hers is $50,000. We both contribute the maximum amounts to our company retirement plans. I own a home valued at $355,000 with equity of more than $210,000, and we have no credit card debt. With the exception of four cars, two of which we are selling, I believe we’re in pretty good shape. Once married, we’ll be changing beneficiary information where required. Any advice?
Answer: Congratulations on your pending nuptials. It sounds like your finances are in great shape, and they probably will get better.
Although there’s been a lot of talk about the marriage penalty, the truth is that more couples benefit from a marriage bonus--in other words, they pay less in taxes when they file as a married couple than they would if they were single. Because there’s a big disparity in your incomes, you and your fiancee probably will find that your combined tax bill will be lower after you tie the knot, especially if you choose “married filing jointly” rather than “married filing separately.” Although filing separately can have advantages in a few situations, more often you’ll lose tax breaks that would be available if you filed jointly.
If you want a better idea of how marriage will affect your taxes, you can talk to a tax pro or crunch the numbers yourself using a tax preparation program such as TurboTax or TaxCut. These programs will figure your taxes both ways so you can choose the better way to file.
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Family Matters Rarely Just About Money
Q: Your response headed “Parents Aren’t an Investment to Protect” [Feb. 3] was the perfect example of why I read your column no matter what the topic. The reader was helping to support his parents and wanted to ensure his “investment” in them was repaid when his parents died. You said he could consult a lawyer, but suggested that he rethink his motives and perhaps abandon the idea of trying to get more than his siblings. Your reply was not just about money; it was about life and as generous and wise a perspective as I think I’ve ever seen, not to mention simply accurate and practical.
A: Thanks for the kind words. When it comes to family, the issues are rarely just about money. Powerful emotions often come into play that cloud people’s judgment.
That’s why siblings often squabble bitterly about money and property after--or even before--their parents die. They’re often using money to redress perceived wrongs, salve past hurts or make things “fair,” as if that’s really possible. The truly wise let go of the idea that money can make things right, and concentrate instead on preserving relationships with their families--particularly the siblings who will be around long after the parents are gone.
But not everybody views it that way:
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Q: I just read your column about “Parents Aren’t an Investment to Protect” and was so angry that I had to write. How dare you! That man is helping his parents, the only sibling who is, and you treat him like a mercenary. He was not trying to get more than his share, just recoup a part of what he had given, which apparently was agreeable to his parents. And just because he’s single, he has nothing else to spend his money on? Please!
A: Perhaps parents should keep accounts, too, so they can “recoup” their “investments” in their children. Everyone could draft long legal documents that could be fought over in court when Junior, instead of becoming a baseball star as his parents had planned, chooses to become a low-paying teacher with not enough extra income to feather his elders’ golden years.
Please.
This man is doing the right thing by helping to support his parents. It would be nice if the other siblings would contribute, but they’re not--and perhaps they can’t.
Instead of viewing his support payments as an investment
that needs to be repaid, he might consider the money a small token of thanks for the sacrifices his parents made to raise him.
In any case, the man’s father already has drafted a will that gives the son the lion’s share of the estate. The son was worried that wouldn’t be sufficient, but given the small amount involved--about $60,000--it really doesn’t make much sense for him to battle with his siblings over what’s left.
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Liz Pulliam Weston is a personal finance writer for The Times and a graduate of the personal financial planning certificate program at UC Irvine. Questions can be sent to her at money talk@latimes.com or mailed to her in care of Money Talk, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012. She regrets that she cannot respond personally to queries. For past Money Talk questions and answers, visit The Times’ Web site at www.latimes.com/moneytalk.
