Why do I owe so much tax this year?
Last year, I earned $ 36k with one exemption (me), while my wife earned about $ 30k with one exemption (her). Married filing jointly landed us a tax bill of $ 1146 in addition to the $ 5300+ we paid throughout the year in payroll deductions.
We both reduced our exemptions to zero. I earned $ 41k this year, she earned $ 39k. I ran the TurboTax return calculator, and again it says we will owe over a thousand dollars, after paying $ 6800 in federal income deductions.
Is this the marriage penalty? We don’t have kids and can’t yet afford a mortgage due to student loan debt and various bonehead credit card balances from the past. I did pay $ 1800 in student loan interest, but that doesn’t seem to make a dent.
What are we doing wrong? How can we owe so much in taxes? We claim zero exemptions, the only thing left for us to do is pay EXTRA each paycheck. That doesn’t seem right.
We have only lived in Washington state, there does not appear to be a renters credit available for us, nor is head of household an option.
We also both put 10% of our income into our employers’ 401k programs, which helps reduce our taxable income some, but not enough.