2013 Tax Bill: Who *Really* Gets Hit

On January 5, 2013, in finance blog, by Dave

Drum roll please:

3. Anyone (the 53%) who pays federal income taxes.
2. Single No kids (SNOKs).
1. DINKs:  Dual-Income No Kids.

The 2013 tax compromise hits everyone who files because of the change in Social Security tax.  From the very first dollar rates go from 4.2% to 6.2% for Social Security.  Compared to 2012, virtually everyone pays more taxes in 2013.

Having no kids really hits taxpayers.  Don’t miss my message… children are expensive to raise, and having children will not save you money!  But having children will reduce your tax bill due to myriad credits from the child tax credit, to extra exemptions, to 529 college savings plans.

Having no children hits single taxpayers some, but DINKs get hit harder for total incomes above the 15% tax bracket (approx $71,000).  Married couples making $248,000 per year — not quite Obama-rich — will pay $4548 more in Social Security taxes alone than they did in 2013 if the partners make similar incomes.  If, however, another couple with a single wage earners (SINK: single income no kids), SocSec tax would be half, $2274 due to the $113,700 Social Security cap, which is assessed per person, not per couple.

The marriage penalty, which never fully went away, is back with a vengeance in 2013.  The higher the income, the greater the marriage penalty.  The more equal the incomes, the greater the penalty.  It is almost like the tax code is telling married women to stay home and get pregnant.  It is hard to believe it is 2013, because it feels like the tax code is still written with a 1950′s mentality.

 

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