The Balanced Spreadsheet-Financial News, Budget Advice, Debt help, Financial Tips, and other advice

November 25, 2009

The Ohio Marriage Penalty

Filed under: Excel fun, Personal Finance, Real Example, Simulation, Uncategorized — Tags: , , , , — thebalancedspreadsheet @ 11:50 am

With 2009 quickly coming to a close, it is that special time of the year again. No, not Thanksgiving. No, not “Black Friday”, but time for year end tax planning! I know tax planning is not the most exciting thing in the world but I do feel it is important to keep an eye on it to make sure you are legally minimizing your tax bill as I have written before on how much you really pay in taxes.

Since I got married in May I was going ahead and running the numbers for Ohio’s income tax to see what the tax difference is between married filing separately and married filling jointly. I knew that there would be some difference, but I was a little surprised to find out that it will cost us about $460 more to file married instead of separately!

As you can see from the chart here, Ohio’s state income table is the same under any circumstance unlike the federal incomes rates which changes depending on whether you are single, married filing separately, married filing jointly, or head of household. For example that means if you are married filing jointly and you both make $40,000 Spouse #1 pays the same tax as if they were single. However, spouse #2’s $40,000 would get taxed at 4.109% instead of starting at .587% and moving up in $5,000 increment until the final $20,000 gets taxed at 3.521%. Ohio does get a 5% tax credit for filing jointly but does not come close to covering the gap.

Now we could file separately and avoid the marriage penalty. However in Ohio you have to file whatever you file on your federal income taxes and filing separately would make us ineligible to fund ROTH IRA’s for 2009 and the tax free growth of ROTH IRA’s is more valuable then the $460 long term. IT is disappointing though to pay more tax simply because you committed the “sin” of marriage. J

Overall the $460 is not going to change our life either way, but perhaps this why Ohio’s growth rate is among one of the lowest in the nation.

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1 Comment »

  1. […] year due to budget problems.  After accounting for that my wife and I paid about $617 this year in marriage penalty to Ohio.  […]

    Pingback by Do you know your Tax Freedom Day? « The Balanced Spreadsheet-Financial News, Advice, tips, and more — March 8, 2010 @ 5:08 pm


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