How Could We Owe Taxes For 2017?

[1-stephen-porter]

My wife and I both claim a 1 on our W4s and have them marked as Married. We also own a home and pay a mortgage as well as student loans with student loan interest. We have no investment income and our ONLY source of income is wages from our employment.

In 2016 (our first year filing as married joint), we received a refund with the exact same tax situation as we have now. This year (2017) is our second year fililng as married joint.

I make about $85k/year and she makes about $40k/year.

Anyhow, when filling out our taxes, without any deductions, we end up owing over $5,000 federal and nearly $1,500 state! With deductions, we still owe nearly $1,000 federal and $500 state!

How do we end up owing so much when we only claim 1 on our W4s?

[SweetieJean · Accepted solution]

Many married couples end up owing taxes because their Joint income boosts them into a higher tax bracket.

You may need to both claim 0 allowances and "Married but Withhold at the Higher single Rate," as well as have a specific additional dollar amount withheld.

[1-stephen-porter]

This scenario does not apply to us. We both individually are in the 25% tax bracket and married joint are in the 25% tax bracket.
<a rel="nofollow" target="_blank" href="https://files.taxfoundation.org/20170123140911/TaxFoundation-FF534.pdf">https://files.taxfoundation....>

[SweetieJean]

Actually, you are not.  You have to look at the MFJ brackets for each of you, not the Single or MFS ones. Her $40,000 income is in the MFJ 15% bracket, and that's how her withholding was calculated.
<a rel="nofollow" target="_blank" href="http://fairmark.com/general-taxation/reference-room/2017-tax-rate-schedules/">http://fairmark.com/ge...>

[VolvoGirl]

When you are married and both have W2s the Tax gets progressively higher.  When my husband and I both worked I claimed Single with zero and even had more $ taken out.  Each job is only withholding like it is the only job for both of you.

[1-stephen-porter]

@SweetieJean, good point. I was looking at the wrong W4 for her. In 2016 she left it as single, but updated it in 2017 to be married... so her W4 update was the knife... Thank you for clearing that up as I was so confused haha :smile: