If you have been reading my blog for a while, you’ll know that my husband is also an engineer. We worked together for over 10 years, until I decided to take a career break to become a stay-at-home mom to our two young kids almost a year ago.
When my husband’s not working full-time as an engineer he spends a lot of his extra time learning about finance. He listens to finance podcasts and reads finance blogs. Some of his favorites are Financial Samurai and Money for the rest of us.
My husband also reads my blog posts, but he rarely offers ideas or advice for this blog. So I was surprised and interested when he suggested I write a blog post about the recent changes to the new tax law.
At my house he is our money guy. He watches the bank and credit card statements, pays the bills, files the taxes, etc. I don’t know much about anything to do with finance (and to be honest I’m perfectly happy this way…).
So when he suggested I write about a tax rule I immediately said “no, but thank you for the suggestion,” then I asked him to write it as a guest post. He fired back that he isn’t a writer, but he would help me with the research and details…so here we go.
Financial Samurai recently had a great post “The Marriage Penalty Tax Has Been Abolished, Hooray!” and if you’re like my husband and this topic really interests you I highly recommend reading it.
If you’re more like me and you have a casual (or very little, in my case) interest in the topic I have a brief summary for you below.
Until this year, if you were married with both spouses working and both earning mid-career engineering incomes ($100,000+ each per year), you were likely paying more by filing taxes as a married couple than if you filed taxes as separate individuals due to how the federal tax brackets were setup. (See the 2017 Tax Brackets in the table below)
This was unfair to high-achieving dual-career married couples. Because if, on the other hand, one spouse earned lower than $100,000 or did not work at all, being married when filing taxes worked to your advantage. So was the government trying to say they didn’t want both spouses working (or at least not both spouses to be high-income earners)?
Even to someone like me with novice financial knowledge, this seems unfair and biased penalty. But with the 2018 tax reforms that have been signed into law most of the marriage penalty for high-income dual-career couples has been abolished.
The new 2018 Federal income tax brackets keep married couples paying the same tax rate as a person filing individually up to each spouse earning $300,000 a year. That’s great news for married dual-career engineering couples! (See 2018 Tax Brackets in the table below). Anything over $300,000 each and you are paying more federal tax as a married couple then as unmarried individuals.
You no longer have to wonder if it makes financial sense to marry your engineer co-worker boyfriend. You won’t be paying more taxes because your married, so if that is what was stopping you it’s time to get hitched. And for those of you who are already married, you just got a raise! Time to go shopping for some new shoes.
Of course, now that I’m a stay-at-home mom and not earning any income, we didn’t benefit from the tax law changes (so no new shoes for me…lol).
If you want more details on how the 2018 tax law changes affect married high-income earning couples, I highly recommend reading Financial Samurai’s post on the topic.
Are you a dual-career married engineering couple? Did you already know about the previous marriage law penalty and recent changes?