Tuesday, March 18, 2008

The Singles Penalty: Tax Code Discrimination

Welcome to Singletude! Iiiiiiiiiiiiiiiiiiiit's.........tax time! With your host, Clever Elsie! {cue bouncy music that sounds like it's laughing at our misery}

Yes, income tax is one issue on which Singletude has difficulty being a positive blog. But optimism will prevail, even in the face of the overt discrimination we'll acknowledge today.

Move over married couples. You're not the only demographic that has a corner on tax code bias. In fact, marrieds mostly make out good on April 15, and it's singles who feel the pain in their pockets on Tax Day. Here's why in plain, simple, non-jargonistic language (which is not because Elsie thinks you're a simpleton but because she isn't Clever enough to explain it in jargon):

1. The tax rate for singles is higher across the board than it is for marrieds in the same tax bracket. This article has an example of a single and a one-income couple, both earning a total of $100,000 a year. The married man or woman is taxed at 25%, but the single has to fork over 28% just because he or she has committed the crime of singleness. That's a nest egg of $4,125 more a year for the married couple to buy a used car, hire a housekeeper, or go vacationing in the Caribbean. Doesn't sound much like justice for all.

2. If you're a single parent, you're entitled to a Child Tax Credit of up to $1,000 per child. But that credit phases out when your income hits $75,000. However, if you're married, your family can earn up to $110,000 before you're ineligible. Let's go over this again in case you're as confused as I am: If Person A and Person B each have two kids, Person A is entitled to more government handouts because Person A has more money and a spouse. Something here doesn't compute, and I don't think it's my underwhelming math skills.

3. If you're a single parent whose child lives with you less than half the year, you can't claim him or her as a dependent even though you may be covering half of his or her expenses. If your child splits his or her time equally between you and your former partner, the partner with the higher income gets to claim the child. Again, what's wrong with this picture? It's as if Dali thought up our tax system.

4. You can usually file as head of household, a move which saves you big, for any dependent you support, including kids, parents, siblings, extended family, and even domestic partners. But there's a catch. If your state outlaws cohabitation, you can't claim a boyfriend or girlfriend. Further, if you've been married for even a month during the past year, your husband or wife can be your dependent, but you must have lived for the entire year with a domestic partner to qualify for the same deduction. Obviously, filing jointly, the biggest money saver of all, is not an option. In other words, save sex for marriage, boys and girls, or Uncle Sam will take away your pocket change.

5. While single homeowners are making gains, most houses are still the property of married couples, and those married couples get a nice little break known as the mortgage interest deduction, which means these twosomes can expect reimbursement for the interest paid on their monthly mortgages. In most states, however, renters don't get a similar deduction for the cash laid out on apartments every month. Instead, up to half the income of the single renter drains into the pockets of a wealthy landlord and is never seen again.

The above examples of flaming inequity might prompt you to ask exactly what has become of the mythical marriage penalty or if it was ever real at all. It does exist, most notably when marital partners file jointly and their total income propels them into a higher tax bracket than either would have been in if they'd filed separately. But this only occurs when the partners earn roughly equivalent incomes or when they qualified separately for the Earned Income Credit for the working poor but lose eligibility with their combined salaries. However, if husband and wife have an income disparity, their tax breaks will dwarf those of singles, and the greater the disparity, the bigger the break. Despite lip service to working families and career women, Congress still prefers the stay-at-home mom model.

Now pretend for a moment that you read about the above tax system unaware that it described the United States. What kind of country would take shape in your mind? Certainly not one in which nearly half the population is single...or one in which there are cohabiting couples, gay or lesbian pairs, low-wage earners, city dwellers, or anyone who isn't part of a traditional male breadwinner suburban society. And we haven't even scratched the surface of the injustices imposed by the estate tax, insurance benefits, and social security.

Married couples claim they're entitled to bigger breaks because they have double the expenses. But the platitude that two can live as cheaply as one rings true for rent, utilities, household purchases like TVs, computers, and furnishings, and transportation if the couple is careful. So singles are the ones who really need the relief. Furthermore, marrieds have no call to complain about getting bumped into a higher tax bracket when they're still taxed at a lower rate than singles in the same bracket.

While there's unfortunately no loophole to wiggle out of the singles tax penalty, you should be wise to the steps you can take to minimize your liability as a single filer. Tomorrow, Singletude covers some of them.

What do you think about the discrepancy between tax rates for single and married filers? Can you think of a better solution?

Fun Link of the Day


  1. That bouncy music may be laughing at you, but not at me. At least, not yet anyways. This is the only thing I have as an advantage. Although, I do plan on going to law school, so I’ll probably spend my time helping people evade taxes, although evade is such a negative word.

  2. That bouncy music may be laughing at you, but not at me.

    Don't worry. Your time will come. :P

    I’ll probably spend my time helping people evade taxes

    So you want to be a tax attorney, hm? One of my good friends is currently in law school and gets teased to pieces because he's thinking about becoming just that. Apparently, tax attorneys get no respect in the legal community. But you still have time to change your mind. :)


Put those clever minds to work and share your thoughts, questions, and suggestions with Elsie!