Dual vs. Single Income, No Kids Tax Guide

When you don’t have kids, people usually assume that you have more time and money on your hands. And while that may be true to some extent, being child-free also means your financial planning needs are different. 

The number of child-free couples is on the rise. The 2020 U.S. Census found that 30% of married couples did not have children, and 28% of households were single people with no children.

However, traditional financial planning is still geared toward nuclear families with 2.5 kids and a house in the suburbs. If you’re part of a child-free couple or single with no kids, read below to learn how financial planning and taxes might differ for you.

What is a DINK? 

The term DINK means “dual income, no kids” and refers to couples that have two sources of income and don’t have any children. DINKS are usually part of the same household but do not have to be married or in an official domestic partnership.

Being part of a DINK couple means that you have more disposable income than couples living apart or single people living alone, since many expenses can be shared. The term DINK may refer to couples who plan to stay child-free, as well as those who are still on the fence about having kids. 

What to know about being a DINK

Financial planner Jay Zigmont, CFP of Childfree Wealth has worked with DINKS for years. He said most financial planners offer advice that is geared toward families, whereas child-free couples need more specific advice.

One common refrain he notes is helping individuals find their dream job. Because DINKs don’t need to worry about paying for childcare, saving for college, and other costs associated with children, they can focus more on choosing a career they care about.

He says that when couples ask him how much they should save for retirement, the first question he asks them is if they actually want to retire. Most of the time, the answer is no. 

“Retirement is not a goal,” he said. “They’ll find a job they’ll enjoy and do it for their entire life.” 

That’s when he can start helping them determine what their dream job is and what they need to get it, whether it’s going back to school or taking a sabbatical. 

How being a DINK affects your taxes

While most people focus on the benefits of being a DINK, there are a few downsides. In rare cases, some couples pay more in taxes after they’re married. This is known as the “marriage penalty.” For federal taxes, it mostly only affects couples in the 37% tax bracket. For state taxes, it can affect couples in many different tax brackets. 

When you’re a married couple, you can choose to file taxes jointly or separately. Most couples receive more benefits by filing taxes jointly. 

However, if you have federal student loans and are on an income-driven repayment plan, your spouse’s income will be factored into those monthly payments. The only way to circumvent that is to file taxes separately. 

However, when you file taxes separately, you can miss out on other potential credits and deductions. Talking to a qualified tax expert can help you determine which strategy is cost-saving. 

What is a SINK?

The term SINK or “single income, no kids” refers to a person who has only one income source and no children. While SINK usually means only one person in the household, it can also refer to two people living on one income.

Financially thriving as a SINK can be much harder. Unless you have a roommate, there’s no one to split basic expenses with, and there’s no one to fall back on if you lose your job or have a medical emergency. 

“The one scenario that pops in my head of when it would be better to be a SINK is if you are doing an income-based student loan forgiveness program,” said financial planner Heath Biller of Fiduciary Financial Advisors. “A SINK may be able to qualify for a lower monthly loan payment compared to if they were a DINK.”

How being a SINK affects your financial planning

When it comes to financial planning, one of the biggest distinctions for SINKs is that they need to have adequate disability insurance and long-term care insurance. Disability insurance provides coverage if you become completely or partially disabled and can no longer work. 

Social Security disability benefits are notoriously low and may barely cover basic living expenses. Long-term care insurance will cover some or all costs associated with assisted living, nursing homes, or in-home nursing care. SINKs who don’t have a partner to care for them will need to have a plan for their senior years. 

Zigmont said he also encourages single individuals to have a power of attorney set up so there will be a process in place in case they’re medically incapacitated.

How being a SINK affects your taxes

Many popular tax credits and deductions are available to those with children, like the Child Tax Credit . 

“This also means that you will likely have fewer tax credits/deductions and will probably pay more in taxes,” Biller said.

But don’t be discouraged, there are many missed tax deductions that you may be able to claim. Moreover, there are new and expanded tax credits if you made energy efficient home improvements or purchased an electric vehicle.   

When couples with children work on their estate plan, they often want to minimize taxes later so their kids aren’t stuck with a bill. But, Zigmont said child-free DINKs or SINKs are better off reducing taxes now instead of in retirement or after they die. 

For example, many individuals leave money to charity in their will. But, if you care about leaving a legacy for a non-profit, you can set up a Donor Advised Fund (DAF) to get the tax benefits now instead of when you’re gone. If you create a DAF, you can donate now to claim an immediate tax deduction. 

Talk to an Expert

Whether you’re a DINK or a SINK, if you need help with financial planning or tax-saving strategies, look for a qualified resource. Because most financial planners assist families, they’re not as equipped to handle the nuances of a DINK or SINK life, according to Zigmont.

“If you are child-free, be sure to ask your financial planner how not having kids ever impacts your financial plan,” he said. “If they say it doesn’t change the plan, walk out. If they say something along the lines of, ‘You’ll change your mind,’ run out. If they say they don’t know or will find out, that is a good start. It is even better if they specialize in helping people like you.”