A 39.6% rate applies to income above a certain threshold (specifically, income in excess of the “applicable threshold” over the dollar amount at which the 35% bracket begins). The applicable threshold is $450,000 for joint filers and surviving spouses, $425,000 for heads of household, $400,000 for single filers, and $225,000 (one-half of the otherwise applicable amount for joint filers) for married taxpayers filing separately. These dollar amounts are inflation-adjusted for tax years after 2013.
COMMENT: There is a MAJOR marriage penalty here. Two single people living together would get two $400,000 exemptions (one each). A married couple gets hit when combined income exceeds $450,000. Perhaps some of those same-sex couples that are married under state law will not be happy now if the Supreme Court rules that they should be subject to the same tax rules as other married persons.
Looks like some high rolling gay and lesbian couples may be in for a rude awakening if they get “victory” in court, as will their heterosexual counterparts.
This, however, illustrates a point I’ve made for a long time: the “rights” of civil marriage are dicey at best, and no place are they dicier than the tax code. It doesn’t take much for the “benefits” of civil marriage to turn into liabilities. It’s entirely possible that those in the higher income brackets will start looking at civil marriage like those at the bottom generally do, i.e., something they can’t afford.
Stuff like this is why I’ve advocated abolishing civil marriage for a long time. If people would look at the law less romantically and more realistically, our political life would be vastly different–and, IMHO, better. Until then, we’ll never have change we really can believe in.