Tax Advantage of Being Single
Although marriage allows you to pool resources and doubles many of your tax deductions, being single can result in a much lower tax bill. A single income may qualify you for more tax breaks, especially ones that do not double the income limit for married filers. However, filing a joint return usually gives you the lowest tax bill.
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Marriage Penalty
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For most couples the marriage penalty is a myth, except for those in the highest income brackets. In 2011, the income ranges for the tax brackets are double those for married couples until the 28 percent tax bracket and above. Also, being single can help you qualify for certain tax breaks. For instance, The earned income tax credit has an income limit of $13,460 for single payers and $18,470 for married couples filing jointly with no dependents in 2010. If you earned $12,000 and your wife earned $8,000 in 2010, you would not qualify for the EITC, but you would as single payers.
Liability
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When you file a joint return, you take liability for your spouse's debts, but you have separate liability as a single payer. For instance, if you had a spouse that had unreported income on the side, the IRS could charge you both with tax fraud. If you divorce, you could pay off a spouse's tax bill for several years during the time you were married.
Disadvantages
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Single payers are more likely to face a penalty than married couples, according to Liz Weston of MSN Money Central. For example, if you have a high income and had a spouse who didn't work, the spouse with no income would drag some of your income into a lower tax bracket. Also, married couples tend to live longer that unmarried people. This means that couples collect more Social Security benefits and even if a widow never works, she usually collects benefits from her deceased husband.
Considerations
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Being single and married have effects on your financial life. For instance, when spouses receive health care coverage it never counts as a taxable expense. Employer-provided insurance for domestic partners often counts as taxable income. However, married couples tend to live paycheck to paycheck because they have more monthly expenses, such as a mortgage, and children. Single payers with a low income tend to save more on taxes than couples with a low income.
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References
- MSN Money Central; The Myth of the Marriage Penalty; Liz Weston; November 2010
- "Forbes" Magazine; The Cost Of Being Married Versus Being Single; Tom Van Riper; July 2006
- Unmarried America: The High Cost of Being Single in America; Thomas F. Coleman
- Bankrate.com; When It Pays to Stay Single; Kay Bell; May 2009
