What Is the Effect of Married Withholding at a Higher Single Rate on the W-4 Form?

The amount of money you have withheld from your paycheck for federal income taxes has a dramatic impact on whether you'll owe money or get a refund when you file your tax return for the year. In order to help determine the appropriate withholding amount, your employer will have you complete Form W-4. One of the choices that married people have available on Form W-4 is the option to have taxes withheld from their paycheck at a higher single rate, but it's not immediately clear on the form exactly how it will change the amount withheld. Below, we'll take a closer look at this option and its impact on your withholding.

Why withholding at a single rate is higherThe tax laws impose different tax brackets on people based on their filing status, and withholding is based in large part on the anticipated taxes from those brackets. When you look at those brackets, you'll notice that for the lowest 10% and 15% brackets, the amounts for married joint filers are exactly double those for single people. For the 25% through 39.6% brackets, the married amounts are still higher than the single amounts, but they're less than double.

The withholding tables that the IRS uses effectively take those tax bracket differences into account. As a result, single people will have more money taken out of their paychecks than married people with the same income. The exact calculation is complicated by the fact that Form W-4 has you calculate withholding allowances, and so the tables that determine withholding don't exactly resemble the two-to-one ratio that the tax brackets for married and single taxpayers have. Nevertheless, the net impact is similar.

An exampleFor instance, say you're married and earn $1,000 per week. If you claim no withholding allowances, then the IRS tables for 2016 will have $107.55 taken out of your weekly check for federal income tax withholding. That's equal to $35.70 plus 15% of the excess of your earnings over $521.

If you claim the higher single rate, then the IRS will use the single table. That will result in withholding of $157.90 per week, which is equal to $99.65 plus 25% of your excess earnings above $767.

As you can tell, single people earning $1,000 per week would typically be in the 25% tax bracket, while married filers earning $1,000 per week are still in the 15% bracket. The higher withholding reflects those differences.

Why have money withheld at the single rate?The primary reason why many people choose to have money withheld at the higher single rate is that it more closely reflects the actual taxes that a two-earner couple will owe. Form W-4 has instructions that can give you an alternative method of calculation to be more precise, but using the higher single rate for withholding is a simpler way that works fairly well for most couples.

The net effect of having money withheld at the higher single rate will be either to reduce your eventual tax bill or to boost your refund. Especially when both spouses work, electing the higher single rate for withholding is worth a further look.

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