Should Income Tax deductions be pro-rated?

Question

Inspired by a previous question as to why the magical number 18 is the dividing line between being an adult or child, when in reality we tend to mature much later (in many cases).

When you file your Income Taxes, you will notice at least two things that seem illogical and unfair.

A baby born on Jan. 1 doesn't get the full year deduction for it's parents as does the same baby born on Dec. 31.

Same holds true for people who get married. They can't get the advantage of "Married filing Jointly".

If you were in Congress, would you propose a law that makes these Income Tax advantages pro-rated on a monthly basis, so that a child would get a twelfth of the benefit for each month.

This may sound ridiculous to you, but serious money is lost on a child who has the disadvantage of being born just after midnight on Jan. 1. Roughly several hundred dollars of benefit is at stake, maybe more depending on the tax bracket.

Maybe folks would want to induce labor sooner over this?

Yes, I know the difference between exemption and deduction, and yes, it does get complicated, but no, no increase in taxes (read my lips).

I messed up this question, and it was ill timed (it's after tax filing season).

Child born Jan. 1 had no benefit for the parents tax return of the previous year.

Child born Dec. 31 gets full year benefit on parent's taxes.

Answer 1

I'm not sure just what you're saying. A baby born on Jan 1 or Dec 31 DOES give an exemption for the entire year, and a couple who gets married during the year CAN file as married filing jointly for the year, whether they were married for 365 days of the year or 1.

If you're saying the child born on Jan 1 should get part of an exemption for the PREVIOUS year, why? They weren't born for any part of that year. Prorating wouldn't change anything - zero twelfths is still zero.

Answer 2

A couple who gets married counts the year of marriage as married all year. When they divorce, they count the year they are divorced as unmarried. So that one inequity pretty much evens out. If one spouse dies, the other spouse gets to count the year of the spouse's death as married all year, so there is an advantage in this case.

A persons's exemption is a full exemption in the year of birth, as well as a full exemption in the year of death. So, that case also is quite fair.

If your proposal to pro-rate the personal exemption in the year of birth were accepted, then the exemption in the year of death would also be pro-rated, to be "fair". This would not result in an overall advantage to taxpayers as a group. It would benefit some taxpayers, and not benefit others. So it would not be a better system than what we have now.

So I would not be in favor of pro-rating filing status or personal exemptions. Although an individual may be at a disadvantage, the taxpayers as a group are taking deductions fairly as far as exemptions and filing statuses are concerned.

Answer 3

First off, you need to learn the difference between a deduction and an exemption. Once you've done that, get back to us.

But to answer the basic gist of your question: Don't you think it's complicated enough already??

There's little "benefit" to filing a joint return. It's a wash for most taxpayers and actually costs MORE for some. Few see an actual tax reduction by getting married and filing jointly.

And, your suggestion would actually INCREASE taxes. Is that what you want?

Answer 4

First, taxes are not "fair" in any sense of the word. How is it fair that people who choose to have children get all the benefits and less of the burdens because of their own personal choices? This has never made sense to me, and I am a parent.

Secondly, if something like this was enacted, it would require another entire IRS department, which equates to millions, if not billions, of dollars and more lifetime pay and benefits. This would continue to add to the burden we are already creating for our children. We cannot "solve" problems by increasing burden. Half the problems in this country are related to the fact that our government is too large, and too well taken care of. Imagine your life if 50% (or more) of your income didn't go to the tax man.

So, no, I don't want congress to "fix" this.

Answer 5

It is done this way because it would be too much of a pain to prorate the standard deduction and the personal exemption.

In the big scheme of things, this is minor.

So, no, I wouldn't propose a law like this if I was in Congress.

Answer 6

You sound like a Capitalist, You seriously expect people on 30k a year to pay the same tax rate as Gena Rineheart?