Marriage penalty for deductions?

October 26, 2012 5:48 PM

Question about 2011 US federal tax deductions and married filing status: Trying to fix a problem with my tax return; please help!

2011 was our first year filing (US federal) taxes with married status. We both filed as "married filing separately", but she took the standard $5800 deduction and I claimed itemized deductions of $14000 as a result of mortgage interest and property taxes for the house I bought before we were married.

So basically, we both paid taxes as if we were single. Apparently, this isn't allowed; both partners must claim either standard or itemized deductions.

Now we face three choices. I've worked out the numbers and it's grim:

1. Amend returns to file jointly (owe IRS additional $1060)
2. Amend my return to claim standard deduction (owe IRS additional $1200)
3. Amend spouse's return to claim itemized deduction of $0 (owe IRS additional $900)

And that's not even counting additional state taxes or penalties.

The reason for the increases is that our combined deductions filing single would have been $5800 + $14000, but under both married options we have to choose as a couple between either $14000 itemized or $11600 standard.

This is a total WTF. By marrying, did we forfeit the majority of our home ownership tax benefits? I can't believe this is how things are supposed to work. MetaFilter, did I miss something?

posted by qxntpqbbbqxl to work & money (11 answers total)

She doesnt have anything that can be itemized? State taxes, maybe?
posted by mr_roboto at 6:24 PM on October 26, 2012 [1 favorite]

Welcome to the marriage penalty. The tax code makes many tax benefits "one per household" and treats people who are not married to each other are two households. The most important benefits that are one per household are lower marginal income tax rates, and (as you have found) certain important exemptions and deductions.

If you want to feel sort of good, the marriage penalty can be much, much worse -- $10,000 to $20,000 is common when the second income puts you up in brackets or if a high-paid husband has a low-paid wife.
posted by MattD at 6:42 PM on October 26, 2012 [2 favorites]

Domo arigato, mr_roboto. She paid around $1200 in state income taxes that could be itemized. That will save a few dollars.
posted by qxntpqbbbqxl at 6:42 PM on October 26, 2012

There might also be some added deductions for married couple with state sales tax deduction as well. No home office or other earnings besides employer?
posted by ptm at 6:45 PM on October 26, 2012

Single, sharing a house we own jointly. She makes more than I do, so I give her all the itemized deductions, and take the standardized deductions for myself. Then she cuts me a (sizeable!) check for half the difference every year.

Seriously - Get divorced. You'll do better filing singly, unless one of you makes a lot more than the other.
posted by pla at 6:49 PM on October 26, 2012

Have you looked at amending both your returns and splitting the mortgage/property tax deductions? Depending on your brackets it might come out to less of a difference than your best figure of $900.

By marrying, did we forfeit the majority of our home ownership tax benefits?

Essentially, yes. My interest and property tax deductions are well below the married filing jointly standard deduction.
posted by muddgirl at 6:56 PM on October 26, 2012

While you're at it, you might want to double-check your withholding for 2012 and do some tax planning now, so that you are not surprised by your 2012 tax bill.

(Any charitable deductions to throw in there?)
posted by stowaway at 7:23 PM on October 26, 2012

It isn't really a marriage penalty. When you share a home, your expenses don't double. Likewise her income helped pay for the items you itemized.
posted by 2manyusernames at 6:11 AM on October 27, 2012 [1 favorite]

It isn't really a marriage penalty. When you share a home, your expenses don't double. Likewise her income helped pay for the items you itemized.

Our lifestyle and finances didn't change at all - we'd been living together for years before being married. The simple fact of being married, though, forces us to claim deductions in a different and detrimental manner. It's a very real marriage penalty.
posted by qxntpqbbbqxl at 2:06 PM on October 27, 2012

Marriage has many tax implications. Depending on the study, those getting a penalty vs a bonus seems to hover around the 50% mark.

Tax Policy Center on the Marriage penalty and a Marriage Bonus and Penalty Tax Calculator.
posted by fief at 10:59 AM on October 29, 2012 [1 favorite]

Follow-up on marriage and taxes: After more reading, my conclusion is that tax laws surrounding marriage heavily promote the Normal Rockwell Republican nuclear family: If you have a stay-at-home parent and a bunch of children, you get a nice marriage bonus on taxes.

On the other hand, if both partners work, have similar incomes, and have no children, you are screwed. But you deserve it, you godless communist.
posted by qxntpqbbbqxl at 7:03 AM on November 7, 2012