Question

Kim and Kayne have been dating for years and are now thinking about getting married. As a financially sophisticated​ couple, they want to think through the tax implications of their potential union.

a. Suppose Kim and Kanye both earn $70,000 (so their combined income is $140,000). Using the tax bracket information​, calculate the combined tax bill that they would pay if they remain​ single, and compare that to the taxes they would pay if they were married and filed a joint return.

b. Now suppose that Kim and Kanye both earn $104,000 ​(so their combined income is ​$208,000). Calculate the combined tax bill that they would pay if they remain​ single, and compare that to the taxes that they would pay if they were married and filed a joint return.

c. What differences do you find in parts (a​) and (b​)? What is the cause of these​ differences?

    Taxable Income  
Tax Rates   Individual Returns   Joint Returns
10.0%   $0 to $9,075   $0 to $18,150
15.0%   $9,076 to $36,900   $18,151 to $73,800
25.0%   $36,901 to $89,350   $73,801 to $148,850
28.0%   $89,351 to $186,350   $148,851 to $226,850
33.0%   $186,351 to $405,100   $226,851 to $405,100
35.0%   $405,101 to $406,750   $405,101 to $457,600
39.6%   Over $406,750   Over $457,600

Answer 1

a.Individual returns for $ 70000   income
$	Income tax	$ amt.
0-9075	9075*10%=	907.5
9076-36900	(36900-9075)*15%=	4173.75
36901- 70000	(70000-36900)*25%=	8275
Total Income tax		13356.25
Total Income tax paid by both
13356.25*2=		26712.50
Joint returns for $ 140000   income
$	Income tax
0-18150	18150*10%=	1815
18151-73800	(73800-18150)*15%=	8347.5
73801-140000	(140000-73800)*25%=	16550
Total Income tax		26712.50

b.Individual returns for $ 104000   income
$	Income tax
0-9075	9075*10%=	907.5
9076-36900	(36900-9075)*15%=	4173.75
36901- 89350	(89350-36900)*25%=	13112.5
89351-104000	(104000-89350)*28%	4102
Total Income tax		22295.75
Total Income tax psid by both
22295.75*2=	1	44591.5
Joint returns for $ 208000   income
$	Income tax
0-18150	18150*10%=	1815
18151-73800	(73800-18150)*15%=	8347.5
73801-148850	(148850-73800)*25%=	18762.5
148851-208000	(208000-148851)*28%=	16561.72
Total Income tax		45486.72
Difference   (2-1)	2	895.22

c.Income tax as per joint return is exactly twice as that of individual return in a.

Where as

Income tax as per joint return is $ 895.22 more than the twice amt. of individual returns

because higher inome levels, the tax rate brackets for joint- filers are not twice as wide as the rate brackets for those filing as single.So, the incom etax calculations ,need to be done with the next bracket.