Tag: finance

The Marriage Tax Penalty

Photo by Nataliya Vaitkevich

There is a penalty you should be aware of as you approach the consideration of official marriage.  Due to the way the U.S. tax brackets are structured for married couples filing jointly compared to single filers, it may cost your family a significant amount of money each year.. Essentially, the tax brackets for married couples are not exactly double those of single filers, particularly at higher income levels. This discrepancy leads to a situation where a couple pays more in taxes together than they would if they were each taxed as single individuals on the same income.

For example, if two high earners get married and their combined incomes push them into a higher tax bracket when filing jointly, their taxable income can be subject to a higher tax rate than if they were taxed individually. This issue arises because the tax code is designed to provide benefits for married couples with one earner or with significantly disparate incomes, but it doesn’t scale as evenly for two high earners, resulting in a penalty. Additionally, certain tax credits, deductions, and exemptions phase out at higher income levels, and these phase-outs can begin at lower levels of combined income for married couples than they would for each individual if they were single. This can further contribute to the increased tax burden for high-income married couples. Talk to your tax person before you get married, and as always do your own research. I asked my tax guy specifically if there was anything I should be concerned about tax-wise when I got married. He told me no, and the next tear when I ended having to pay out more than I normally would have got back, I nearly lost my mind. Needless to say, that guy is no longer my tax guy.

There are a lot of issues here that should have been fixed decades ago. I’m not going to rail at the ridiculous state of our politics, but I feel like this is just a simple issue of adjusting the numbers.  There is a real problem with the way that high income is defined. I feel that you can’t just apply the same metric across all households in the country, the numbers should be tweaked yearly based on the economy and your income relative to cost of living. My wife and I together make less than the median income of the town we live in, but we still pay a large penalty each year for the privilege of being legally married. Compared to the rest of the country we might have higher income, but in Southern California we are barely average.  My wife is Catholic and marriage is important to her, but even she has considered the financial benefits of getting a divorce. I don’t really like to think about how much money we have given up for 11 years of marriage but it is likely more than the full cost of my brother’s home in Maine. It will be interesting to see if the institution survives the increased costs of living across the country. 

Is this the beginning of the end for marriage? I doubt it, at least not in our lifetimes. Matrimony is too ingrained in our culture and economy to go away easily. There are also many areas of the country where it is still possible to survive on a single income. I do know plenty of couples though, that have been together for years and have agreed not to get married because of the cost. Some couples even have a wedding to convince their families and just never actually file the paperwork. I have even heard that in some states a couple can get divorced at the end of the year and remarry at the beginning of the next year to avoid the tax burden. I don’t think that would work in California since it takes about 7 months to finalize a divorce. 

So, if you are in this position how do you avoid some of the tax burden? Many people will not be able to avoid the penalty completely but there are some things you can do to minimize the damage. Ask your tax person if filing separately instead of jointly will help. Make sure you maximize your pre-tax retirement contributions like 401(k)s and IRAs. Consider a Health Savings Account or a Flexible Spending Account to reduce your taxable income. Live in your own house instead of renting, you can reduce your tax burden significantly with all the itemized deductions available from owning a home. If you have rental properties consider getting your real estate license so you can write off more passive income each year. There are more options which a better educated financial planner can help you with, especially if you are a business owner.

Whatever your situation, it is good to know that you can save a lot of money by accounting for taxes. For many people, getting married might actually save you money! If you own your house or multiple homes, and or have a business it is probably worth the expense to get some professional tax advice. I tried doing my own taxes a few years ago and simply could not get the same numbers as my current CPA. I estimate that he saves me on average, 7 times what I pay him, by finding deductions and loopholes I would not have thought of. Good luck and safe bookkeeping. The deep waters of the American tax code is no place for amateurs.

Turning Clutter into Cash: A Beginner’s Guide to Selling on eBay

Photo by Andrea Piacquadio

Ever thought about transforming your cluttered garage or hobby into a profitable venture? Selling on eBay might just be the upgrade path and side hustle you’re looking for. I have mentioned it a few times, because it’s the online sales tool that I have the most experience with. Let’s start with a basic overview blog post and perhaps we can go into more detail if there is interest. You should have at least a simple set of goals in mind. For example you might want to clean out all the extra stuff in your garage and make a few bucks or you might want to turn a hobby into a revenue stream with an online store presence. 

If you haven’t already, you need to sign up for an eBay account. Go to eBay’s website and look for the registration link. You’ll need to provide some basic information, like your name and email address. If you already have an account that you’ve used for buying, you can also use this for selling. Navigate to your account settings and select the option to set up your account for selling. This involves providing additional information such as your address, phone number, and choosing how you’ll pay your seller fees. You may also need to link a PayPal account or set up another payment method for receiving payments from buyers. 

If you are just cleaning out your excess stuff, this is all you really need to do. The listing process is pretty straightforward and you can do everything from your phone. I recommend having a postal scale or something similar, packaging tape, scissors, and boxes that fit the size of the items you are selling. It is nice to have an accurate shipping weight already available while making the listing. In some cases you may want to wait and purchase packaging supplies after the item sells, because not everything will sell. Make sure you package well, if your stuff breaks due to defective packaging, good luck getting anything out of the post office. You will likely need to give the customer a refund and eat the cost.

While anyone can sell on eBay, opening an official eBay Store comes with a monthly fee but offers benefits such as lower final value fees, more free listings per month, and marketing tools. Evaluate the subscription levels to decide which one suits your needs based on the size of your business and the number of listings you plan to post. Pick a store name that is unique and  reflects what you’re selling. It’s worth doing a quick search on eBay to ensure the name isn’t already in use or too similar to another. Remember, this name will be part of your store’s URL, so choose wisely. eBay also allows you to customize your store’s appearance. You can add a logo, create a billboard image, and customize the store’s color scheme to align with your brand. Take advantage of these options to make your store stand out and appear professional. Next you will set up your preferred payment methods. eBay now offers “Managed Payments,” where they directly manage transactions. This system supports various payment methods, including credit cards, PayPal, Google Pay, and Apple Pay. 

With your store set up, you can start creating listings for the items you want to sell. Make sure to use high-quality photos, write clear and detailed descriptions, set the right price, and choose the shipping options. Good listings are crucial for attracting buyers. If the item is something you really don’t care about, go ahead and use the auction format with a low beginning price. If you are selling something you know is valuable, consider starting with a higher entry price or having a reserve price where the item cannot sell below a certain price. Keep in mind these options do cost extra money, but can result in a much higher final sale price. You can always re-list the item if it doesn’t sell the first time. If you are running a business with set-price items, make sure you do your research by looking at similar items that have sold on eBay or similar online markets.

Once your store is up and running, promote it to attract customers. Use social media, blogs, or a website to drive traffic to your listings. eBay also offers promotional tools like promoted listings, which can help increase visibility. Depending on your niche you can market at industry events in person as well. I started my first store before the social media craze took hold and I used to send business cards and promotional flyers with each packaged item to attract and retain customers. I still think physical media can be a valid option in addition to everything else, especially if you are marketing the older generation. Try to have something your competitors lack so that you stand out. I used to sell game miniatures and I did my best to always have at least one of everything constantly in stock. I was the one stop shop for this particular niche of collectible miniatures. I would even buy an item from a competitor, just so I had the complete set when no one else did. 

Regularly update your inventory, fulfill orders promptly, and provide excellent customer service. Respond quickly and professionally to customer inquiries. Remember the customer is always right. It is usually easier and more worthwhile to eat the cost of a mistake rather than negotiate with a displeased customer. Protect your feedback, a poor rating will tank your sales. Many people, including myself, will look for other options if your feedback is not 100 percent.

eBay provides analytics tools to track your store’s performance. Use this data to understand what’s working, what isn’t, and how you can improve. Adjust your strategy accordingly to grow your business. You can quickly rack up costs by listing stuff that does not sell. Also look at the time you list your items. I found the best time to list to be between 5pm and 7pm on the west coast for some reason, even though I had a lot of sales on the east coast too. There also appears to be an algorithm on eBay that promotes your listings more right after you list more items. For example I might go 2 weeks without listing anything, selling less and less every day, then I would list ten items one day and suddenly have 24 hours of high sales volume. While navigating eBay’s fee system can be challenging, the vast audience ready to bid on your items makes it worthwhile. If packaging isn’t your thing, consider exploring drop shipping or print on demand. Starting an eBay store requires effort and dedication, but it can be rewarding. Focus on building a positive reputation through excellent customer service and detailed, accurate listings. Over time, you’ll learn what works best for your store and how to maximize your sales.