No. You’re correct. You would get less money back on your taxes if your wife’s income went up. However, the amount your taxes go up is less than the increase to your wife’s income, so you still end up ahead as a couple. You get the largest individual tax breaks when you have a breadwinner, but the total financial incentive (after tax returns) is for both partners to make as much money as possible.
That said, finances are very emotionally charged and how people should approach their finances depends on how they think about this stuff. That’s why snowball debt strategies work - not because they are optimal financially, but because they play into the psychology of a human paying off debt. With that in mind, I suppose you could still feel incentivized to have a large difference in incomes because of the tax breaks - it just isn’t financially optimal if there is a free opportunity for the lower earner to bring in more money.
No. You’re correct. You would get less money back on your taxes if your wife’s income went up. However, the amount your taxes go up is less than the increase to your wife’s income, so you still end up ahead as a couple. You get the largest individual tax breaks when you have a breadwinner, but the total financial incentive (after tax returns) is for both partners to make as much money as possible.
That said, finances are very emotionally charged and how people should approach their finances depends on how they think about this stuff. That’s why snowball debt strategies work - not because they are optimal financially, but because they play into the psychology of a human paying off debt. With that in mind, I suppose you could still feel incentivized to have a large difference in incomes because of the tax breaks - it just isn’t financially optimal if there is a free opportunity for the lower earner to bring in more money.