Mallory

not enough years

Ray

You can buy more .. have you sent off for a pension forecast ....

Elvira

For self-employed people like myself, even though we have a house and 'kids', I pay an extortionate amount of tax because ALL my earnings are taxed at my husband's highest rate.

Plus there is the ongoing fear of falling into the the Alternative Minimum Tax trap:

"In 2006, the IRS's National Taxpayer Advocate's report highlighted the AMT as the single most serious problem with the tax code. The advocate noted that the AMT punishes taxpayers for having children or living in a high-tax state........... A brief issued by the Congressional Budget Office (CBO) (No. 4, April 15, 2004),[5] concludes:

Over the coming decade, a growing number of taxpayers will become liable for the AMT. In 2010, if nothing is changed, one in five taxpayers will have AMT liability and nearly every married taxpayer with income between $100,000 and $500,000 will owe the alternative tax. "

http://en.wikipedia.org/wiki/Alternative_Minimum_Tax

meauxna

Can't you file married/separate to lower your rate?
The AMT trap tho.. mmm, every year's fear.

Elvira

I was wondering about that but my accountant says I'd pay even more that way. Honestly, the US tax system is so complex - I don't even know where to start to figure it out...

Tracym

Just reverse it - tax YOUR earnings at the lower rate, and let him pay the higher bracket.

Somewhat joking, but seriously - the two of you have your earnings lumped together - the first bit is taxed at 15% (I think), the next bit at more, and so on. So why is it YOURS that is the higher?

Generally the accountant would be right - filing separately results in more total tax usually. You probably have to choose who gets which deduction - so how that would work out if you and hubby each "pay your own" I'm not sure. From the total amount of tax paid as a couple, that is probably not the way to go.

You can get Turbotax software very inexpensively, and do the calculations various ways and see how it comes out. I do my own with turbotax every year. If there's any way I can help (without you having to tell me anything too personal) let me know - easy enough to do rough calculations.

Elvira

At the end of the day it doesn't matter which of us pays the higher tax - it all ends up in the same pot.

This might come as a shock to someone from the UK, where everyone - married or single - gets their own personal tax-free allowance and starts at the bottom of the tax band.

As for the AMT - that's just insane.

Ozzidoc

Thanks for the link!

Mallory

yes i have a forecast. I had 6 yrs work, and you have to have 11. i could pay a lump sum when I become retirement age. It would be a bit silly to pay over a lump sum for such a paltry amount of money. Plus, if I kicked the bucket, the lump sum would be gone. I'll just donate it to E.

Ray

My forecast gave me the option of paying amounts as and when I wanted
to buys years ... but after they brought the number of year down from 44 to 30 to get the full pension ..I had no need to buy any

Tracym

Sure, I understand if it all goes together. Some couples do their finances (at least somewhat) separately, that's all I was thinking about.

The allowances (deductions) are larger for married than single and all. And the brackets are larger. But I don't believe they are double, so two married people would pay more in tax than two single ones.

Mallory

workaholic!

Ray

Yup ....that why I retired at 49 ....

Bob

that's bollocks...they just hide it behind more debt.

Bluegrass Lass

That's my fear as well. The gov't really needs to do something about it, otherwise there are going to be some serious economic problems for quite good percentage of the middle class. We did just buy a house, but I don't know if that will help or hurt us for this year. Keeping my fingers crossed..