Many people do not know that there is a marriage penalty in the Ohio State tax structure. If you and your spouse both earn incomes (or if you can allocate non-earned income between the two of you), you must decide whether to file jointly or separately. Most people just instinctively file jointly, but that may not be the right way to minimize your taxes.

Federal taxes have different schedules for single people and married people. There are also different schedules for married people who file jointly vs. separately. As you can see below, federal taxes are higher for single people than they are for married people. If you are married and filing jointly, there is generally a lower tax rate than if you are married filing separately.

Using the tables below, you can see that a single person starts paying taxes at a 25% rate at income above $29,700, but a married couple filing jointly doesn't start paying the 25% rate until income rises above $59,400. The table for the married couple filing separately simply divides the married filing jointly tax brackets by two.

This does not mean that the Federal income tax structure is completely indifferent between filing jointly or separately. However, when the incomes of the two spouses are fairly close, there is no difference in total taxes between the two methods of filing.

EXAMPLE: Both the husband and wife earn approximately $60,000. If they file jointly, their total income would be $120,000, and they would pay approximately $23,317.50 in taxes (see the married filing jointly table above). If they decide to file separately, each would pay approximately $11,658.75, for a total of $23,317.50 - the same amount if they had filed jointly. In general, the greater the difference between the two incomes, the more likely the couple will benefit by filing jointly, rather than separately.

However, the Ohio Income tax has just a single tax table. It makes no distinction between singles and married couples. There is a joint filing credit available to married couples filing jointly, but it is not large enough to make up for the basic marriage penalty in the tax structure.

EXAMPLE: Both the husband and wife earn approximately $40,000. If they file jointly, their total income would be $80,000, and they will pay $3,274.30 based on the table above, before the joint filing credit. Based on the joint filing credit table (see below), they will receive a credit of 5% of the taxes they owe, or $163.71 - this brings their total tax bill to $3,110.59. However, if they file separately, they will each pay $1,281.10, or a total of just $2,562.20, or $548.39 LESS!

Use the grid below to determine whether you should file separately or jointly. It includes the impact of both Federal and State taxes for 2005, assuming no dependents and standard deductions, and it incorporates the Ohio joint filing credit.

NOTE: This grid is provided for illustration only. If you file your State tax return separately, you must also file the Federal return separately. Each individual taxpayer's situation is different. In dual-income households, always run Federal and State taxes both ways before making a filing decision.

If you save money on your 2005 taxes because of this information, consider donating 10% of your savings to my campaign! Just click on the button at the top of this page.