Love, honor — and pay taxes
A closer look at the marriage penalty
If you’re married, you and your spouse probably promised to “love, honor and cherish” each other. But it’s doubtful that anyone said anything about vowing to pay more taxes. Unfortunately, some married couples find themselves facing the so-called “marriage penalty.”
The ins and outs
The marriage penalty isn’t a specific provision in the Internal Revenue Code. Rather, it’s the result of how the tax brackets compare for single vs. married taxpayers. In certain circumstances, a married couple can end up paying more tax collectively than they would owe if they were each taxed as single filers. In those cases, they’re effectively penalized by having to file as a married couple.
To understand the penalty, you must recognize the way that the graduated tax rate system works. Currently, there are seven tax rate brackets. Once your income exceeds the top threshold for a bracket, any additional income is taxed at the higher rate of the next bracket, and so on, until you reach the 2021 top rate of 37%.
Typically, the marriage penalty applies when each spouse earns comparable amounts, though the penalty isn’t as prevalent as it was before the Tax Cuts and Jobs Act (TCJA). That’s because, previously, tax brackets for joint filers weren’t exactly double the brackets for single filers except at the lowest income levels. Therefore, couples often were pushed into a higher marginal tax rate because they were married. It didn’t matter if couples filed jointly or separately, because the brackets for separate filers were exactly half the size of the brackets for joint filers, and thus narrower than the brackets for single filers.
For 2018 through 2025, the TJCA makes tax bracket adjustments so that the dollar ranges for most brackets for joint filers are now exactly twice the dollar ranges for single filers, except for the two highest tax brackets. So, the marriage penalty affects fewer taxpayers — good news for many married couples!
Note, however, that this is bad news for some singles in middle income tax brackets, who’ve found themselves being pushed into higher brackets more quickly. Why? The TCJA achieved the doubled brackets for joint filers by reducing the income thresholds at which singles move into the next bracket.
A possible bonus
When one spouse earns substantially more than the other, a couple filing jointly may actually benefit from a “marriage bonus,” where they pay less tax collectively than they would if they had filed as singles. Whatever your situation, it’s important to meet with your tax advisor to determine how you’re affected by your filing status on your 2021 return.
This material is generic in nature. Before relying on the material in any important matter, users should note date of publication and carefully evaluate its accuracy, currency, completeness, and relevance for their purposes, and should obtain any appropriate professional advice relevant to their particular circumstances.
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