Married couples get the same tax benefits regardless. A raise for the lower earner always means more money for the family, so no, it doesn’t incentivize having a breadwinner over having equal pay.
Let’s do a quick exercise without real numbers. Please let me know if I’m wrong because this is what I thought. If I make 150k and am maxed out on my standard deduction, but then I make 250k and there’s no difference on my standard deduction, I’m not getting more standard deduction. If my wife is a stay at home mom and I make $250k, I am getting more standard deduction now, right?
This is how married taxes work, right? Am I wrong on that? We get different brackets and different rules. I’ve been marred for 7 years and my first year I got all my taxes back because she didn’t work that year. Am I wrong?
But what you’re saying: a raise for the lower earner does give more money. But by being a big earner marrying a now or low earner, it incentivizes high earners marrying low earners. Or mixed earners. It was devised in the time when women didnt work but we needed more tax benefits for taking care of women.
No. You’re correct. You would get less money back on your taxes if your wife’s income went up. However, the amount your taxes go up is less than the increase to your wife’s income, so you still end up ahead as a couple. You get the largest individual tax breaks when you have a breadwinner, but the total financial incentive (after tax returns) is for both partners to make as much money as possible.
That said, finances are very emotionally charged and how people should approach their finances depends on how they think about this stuff. That’s why snowball debt strategies work - not because they are optimal financially, but because they play into the psychology of a human paying off debt. With that in mind, I suppose you could still feel incentivized to have a large difference in incomes because of the tax breaks - it just isn’t financially optimal if there is a free opportunity for the lower earner to bring in more money.
Married couples get the same tax benefits regardless. A raise for the lower earner always means more money for the family, so no, it doesn’t incentivize having a breadwinner over having equal pay.
Hmmm…
Let’s do a quick exercise without real numbers. Please let me know if I’m wrong because this is what I thought. If I make 150k and am maxed out on my standard deduction, but then I make 250k and there’s no difference on my standard deduction, I’m not getting more standard deduction. If my wife is a stay at home mom and I make $250k, I am getting more standard deduction now, right?
This is how married taxes work, right? Am I wrong on that? We get different brackets and different rules. I’ve been marred for 7 years and my first year I got all my taxes back because she didn’t work that year. Am I wrong?
But what you’re saying: a raise for the lower earner does give more money. But by being a big earner marrying a now or low earner, it incentivizes high earners marrying low earners. Or mixed earners. It was devised in the time when women didnt work but we needed more tax benefits for taking care of women.
No. You’re correct. You would get less money back on your taxes if your wife’s income went up. However, the amount your taxes go up is less than the increase to your wife’s income, so you still end up ahead as a couple. You get the largest individual tax breaks when you have a breadwinner, but the total financial incentive (after tax returns) is for both partners to make as much money as possible.
That said, finances are very emotionally charged and how people should approach their finances depends on how they think about this stuff. That’s why snowball debt strategies work - not because they are optimal financially, but because they play into the psychology of a human paying off debt. With that in mind, I suppose you could still feel incentivized to have a large difference in incomes because of the tax breaks - it just isn’t financially optimal if there is a free opportunity for the lower earner to bring in more money.