The federal income tax is not neutral when it comes to marriage. Get married and you and your spouse may pay less to Uncle Sam. Or you may pay more. It all depends.
Whether you get a marriage bonus—your combined tax bill goes down—or suffer a marriage penalty—you pay more as a couple—depends on various factors. Who has how much income from what sources? Who incurs deductible expenses? Who can claim children as dependents? And what tax preferences might you qualify for? It’s not always obvious whether walking down the aisle will make you winners or losers at tax time.
The Tax Policy Center’s new marriage bonus and penalty calculator shows whether a couple would pay more or less income tax if they are married and file jointly, compared with staying single and filing individual tax returns. Just enter information about income and deductible expenses (including which partner has each) and whether you have children (plus who’d claim them if you weren’t married) and the calculator shows how much income tax you’d pay if you were married and how much you’d pay if you weren’t.
The calculator considers many but not all factors that affect a couple’s tax liability. For example, it includes only three tax credits (the EITC, the child credit, and the child and dependent care credit). Other credits, such as those related to education, can also lead to marriage penalties but aren’t in the calculator. And it includes only the most common itemized deductions.
Marriage bonuses and penalties have coexisted for decades. Congress created widespread bonuses in 1948 when it instituted joint filing. Before that, everyone had to file his or her own return and marriage didn’t matter (except in community property states, but that’s a whole other story).
Marriage penalties didn’t appear until the 1960s, when Congress adjusted tax brackets to mitigate what some viewed as a singles penalty—a marriage bonus viewed from a single person’s perspective. (See the CBO report on marriage and the income tax that I wrote 15 years ago; it mostly still applies today.)
More recently, the 2001 tax cuts reduced marriage penalties—and increased bonuses—by adjusting some tax brackets and the standard deduction and coordinating thresholds for phasing out certain tax preferences. That fixed most of the problem for middle-income taxpayers but high-income, dual-worker couples still face a penalty because higher tax brackets for joint filers are less than twice as wide as those for single filers.
Marriage bonuses and penalties aren’t random. One-earner couples almost always get bonuses. Spouses with similar incomes, particularly those in higher tax brackets, almost always suffer penalties. Having children can magnify both outcomes, particularly for low-income families. And same-sex couples, who cannot file joint federal tax returns regardless of their marital status, have no choice about how they file but may still benefit if joint filing would impose marriage penalties.
The calculator makes it easy to determine the tax consequences of marriage. But I have two observations for any reader tempted to use a potential marriage penalty as an excuse for not getting married. Taxes aren’t the least bit romantic and, more importantly, your mother won’t be happy.