House Democratic taxation will increase the marriage penalty for the wealthy

Texas News Today

The House Democratic tax package announced this week would increase so-called marriage penalties for wealthy couples.

Couples filing joint tax returns will be penalized for marriage if their income tax claims exceed those filed as single taxpayers.

According to the Tax Policy Center, penalties are more common if each spouse earns the same amount of income. Existing rules provide for fines, but the 2017 Republican tax law narrowed it.

The House law, which raised about $2.1 trillion in taxes from businesses and the wealthy over a decade to expand the US safety net and other measures, amplifies existing penalties.

This proposal will increase the maximum income tax rate from 37% to 39.6%. A single filer with income of $400,000 or more in 2022 will pay the fee. However, the $450,000 income standard for couples filing jointly is not very high. (In this context it should be doubled, or $800,000, to avoid the marriage penalty.)

(Currently, a single filer with an income of more than $523,600 pays the highest tax rate compared to the couple’s $628,300.)

Leong Labrecque, an accountant and certified financial planner at Sequoia Financial Group, said the House law “clearly carries a huge marriage penalty.”

Other articles on personal finance:
Here’s how to prioritize your financial goals:
Here are some tips to beat inflation when prices rise
Impulse buying is a problem for many consumers

The effect of the penalty goes beyond income tax on salary. The new maximum federal tax rate of 25% on investment income (from valuable stocks and dividends) will also begin in 2022 at the $400,000 (single) and $450,000 (married) levels.

“This is not a daily American [who’d be affected by the change]”Paul Ausurender, director of financial planning for Provision Management Group at CFP, describes the income range.” it’s too high. “

He said that for some couples, the change could result in thousands of dollars in additional taxes annually.

“It’s not a big change,” he said. “No one wants to break it, but it’s annoying.”

tax law

Several amendments could be made as lawmakers continue to discuss the outline of a wider range of packages. It could cost up to $3.5 trillion.

The bill’s success is not guaranteed, given the Democrats’ very small margins in the House and Senate, and the competing vision of taxing the wealthiest Americans.

According to Auslander, House Democrats are likely to set up an income band for the couple to raise more money for the agenda. Reducing or eliminating the marriage penalty would mean less tax revenue.

Currently, the proposed maximum tax rate and income limit would raise $170.5 billion over a decade, according to the Joint Committee on Taxation, a nonpartisan tax scorekeeper in parliament.

High-income couples can change their financial plans if the marriage penalty remains in place throughout the legislative process.

For example, a couple may consider filing separate tax returns, or even remain single, La Breque said.

According to the Tax Policy Center, filing individual tax returns often creates higher tax liabilities under current law.

However, House law may not save this route for many people — couples who submit separate returns will end up in the top 39.6% bracket after an income of $250,000.

source link House Democratic taxation will increase the marriage penalty for the wealthy

LEAVE A REPLY

Please enter your comment!
Please enter your name here