The marriage tax penalty exists when married couples have to pay more than double the taxes they would if they were two single people. This increased tax burden after marriage became known as the marriage tax penalty. It’s one of a handful of the financial consequences of marriage.
The marriage tax penalty doesn’t apply to everyone; it’s based on the income of both spouses. Depending on your income, some couples see a marriage penalty tax and some see a marriage tax break. Some married couples see no change to their tax liability.
Let’s take a look at the marriage tax penalty, an often confusing and overused term, to see what it really means and some of the typical situations when it might apply.
What is the Marriage Tax Penalty?
Some married couples have to pay more than double the taxes they would if they were two single filers. Owing more tax as soon as you married became known as the marriage tax penalty.
The marriage tax penalty exists because tax brackets for married couples are not exactly double the tax brackets for single filers for all income levels. Currently, the tax brackets are aligned for the bottom two tax brackets (10% and 15%), but not the other tax brackets.
When Does the Marriage Tax Penalty Apply?
The amount of tax penalty or tax benefit you see will vary based on your situation. In general, there are a few distinct categories of couples who see marriage tax benefits and marriage tax penalties.
Currently, couples with very different incomes often see a marriage tax benefit, sometimes called a marriage tax credit, under the current rules. Those taking the biggest hit as a marriage tax penalty are couples with similar high incomes and couples who previously had children.
Examples of Marriage Tax Penalties and Bonuses
Before we look at a few examples, you may want to review How Do Tax Brackets Work? To understand the tax penalty, you need to know that our progressive tax structure means you do not pay the same tax rate on all of your income.
Now, let’s take a look at some examples:
Spouses with Different Incomes. If two spouses marry with different incomes, there’s a possibility of a bonus. If a couple who earns $20,000 and $80,000 marry, their total tax bill on $100,000 of income will be lower. The spouse with the higher income will be able to fill in the unused lower tax bracket of the spouse with the lower income. In this example the couple would see a tax savings of over $2800.
Spouses with Similar Incomes. If two spouses with similar incomes marry, we need to look at income levels to see what the outcome will be.
- Lower incomes. Usually there’s no penalty or bonus. If both couples earn $50,000 and marry, their tax bill will be almost exactly double their single tax bills and they won’t see a penalty or a bonus.
- High incomes. However, when both couples earn higher incomes, the combined tax will be more than double their single tax. For example, a married couple earning $200,000 jointly will pay more than double what they paid in tax as two singles earning $100,000 each. In this example they would see roughly an $800 higher tax bill.
Spouses with Children. Historically, one of the culprits of the marriage tax penalty was a standard deduction that was only larger than, but not double, the single deduction. However, that was fixed and the married standard deduction is now exactly double the single standard deduction.
Although, if one spouse had children and was filing as a head of household and marries a single filer, their new married standard deduction will be lower than the sum of their previous standard deductions. A lower deduction often results in a higher tax bill.
Note that in the examples above, we are just looking at tax brackets and standard deductions. Once you add in the actual disparities in income and income level, the number of children you will claim as dependents on your tax return, and whether or not you itemize deductions each situation could be completely different!
How to Calculate Your Marriage Penalty Tax
To calculate a rough marriage penalty tax or marriage tax break to try to predict how it will impact your family, you can use the marriage penalty tax calculator from the Tax Policy Center.
For a very detailed impact of your tax situation you can use our full tax calculator. To use it as a marriage penalty calculator, fill it out twice, once as single and once as married to see the differences.
Marriage Tax Penalty History
When the 2001 Bush tax cuts were put in place, the marriage penalty tax was eliminated for most taxpayers by doubling the single standard deduction for married taxpayers. The tax brackets were also aligned accordingly at the lower tax brackets, so there wouldn’t be any additional taxes just for getting married in the bottom two income brackets.
However, the marriage tax penalty treatment is not consistent across all income levels, nor is it consistent with the treatment for families with children.
Married Filing Separate
Usually, married filing jointly is still the lowest tax for most couples. Using the filing status married filing separately is not a solution to get around a marriage tax penalty.
Unless you live in some specific states, you won’t see a benefit to filing separately. However, in some states, like Ohio, it’s often beneficial for spouses to use the married filing separate rather than to file joint as they have more tax savings.
To see if this applies in your state, you can calculate your tax liability both ways, joint and separate, to see which method will have the biggest tax savings. Before filing your tax return, input both scenarios in TurboTax to see the lowest tax liability based on filing status.
Managing Money in Your Marriage
Obviously, the marriage tax penalty shouldn’t drive your reasons for marriage or divorce. However, it’s important to understand the financial impact of marriage and discuss finances before marriage.
If two spouses have very different incomes here are some ideas on How to Split the Bills When Spouses Have Unequal Pay.