What Is the Marriage Tax Penalty?
Find out who gets a marriage tax penalty or a bonus, and how to save money on taxes as a couple. Â Â
Laura Adams, MBA
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What Is the Marriage Tax Penalty?
A Money Girl podcast listener named Jenna asks:
I recently got engaged, and a friend mentioned something about a marriage tax penalty. Can getting married actually cost more than staying single? Â
Once you’ve found true love, there are many great reasons to get married. But if you’re like Jenna, you may also wonder whether tying the knot could actually hurt your finances instead of help them.
In this episode, you’ll learn who gets the short end of the financial stick for getting married, how wedded couples can avoid paying too much tax, and 5 financial benefits of getting hitched.  .
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What Is the Marriage Tax Penalty?
The marriage tax penalty can occur when a couple filing a joint return pays more income tax than they would have if they remained single and filed as individual taxpayers.
The U.S. uses a marginal or progressive tax system where earning more income means you pay higher rates of tax. Combining spouses’ income can result in getting taxed at a higher rate than taxing each person as a single.
For instance, let’s say John and Sue both earn $35,000 in 2013. As singles, each one would owe a little over $4,800 in income tax. If they get married and file income of $70,000 on a joint return, they would owe exactly double, or just over $9,600.
But let’s say they’re high earners making $150,000 each. As singles, each one would owe about $35,000 for 2013. So, getting married seems like it would double their taxes, for a grand total of $70,000.
Guess what? As a married couple earning $300,000, they would owe just over $75,000, which is $5,000 more than what they’d pay as 2 single taxpayers earning $150,000 each.
Since tax rates at higher income brackets for couples are not double that for singles, combining income can result in higher taxes for couples. Take a look at the following tax tables for complete information:
| Country | |
|---|---|
|
2013 Federal Income Tax Bracket Rates – Married Filing Jointly |
|
|
Taxable Income |
Tax Owed |
|
$0 – $17,850 |
10% of amount in this bracket |
|
$17,851 – $72,500 |
$1,785 + 15% of amount over $17,850 |
|
$72,501 – $146,400 |
$9,982.50 + 25% of amount over $72,500 |
|
$146,401 – $223,050 |
$28,457.50 + 28% of amount over $146,400 |
|
$223,051 – $398,350 |
$49,919.50 + 33% of amount over $223,050 |
|
$398,351 – $450,000 |
$107,768.50 + 35% of amount over $398,350 |
|
$450,001+ |
$125,846 + 39.6% of amount over $450,000 |
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| Country | |
|---|---|
|
2013 Federal Income Tax Bracket Rates – Single |
|
|
Taxable Income |
Tax Owed |
|
$0 – $8,925 |
10% of amount in this bracket |
|
$8,926 – $36,250 |
$892.50 + 15% of amount over $8,925 |
|
$36,251 – $87,850 |
$4,991.25 + 25% of amount over $36,250 |
|
$87,851 – $183,250 |
$17,891.25 + 28% of amount over $87,850 |
|
$183,251 – $398,350 |
$44,603.25 + 33% of amount over $183,250 |
|
$398,351 – $400,000 |
$115,586.25 + 35% of amount over $398,350 |
|
$400,001+ |
$116,163.75 + 39.6% of amount over $400,000 |
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Even for lower tax brackets, when spouses have substantially different incomes, there can still be a marriage penalty, of sorts.
For instance, a stay-at-home spouse or one who only works part-time for a low wage would pay no or little tax if he or she filed as a single taxpayer. But as one half of a married couple, his or her share of the household tax can be much higher.
What Is the Marriage Tax Bonus?
The reverse is true for the spouse who earns substantially more than the other. He or she actually gets a marriage tax bonus, instead of a penalty. This occurs when you pay less tax as a married couple than you would as 2 singles with the same income.
This typically happens because a lower income spouse can pull down the higher one into a lower tax bracket or tier, which reduces overall taxes as a couple. Other marriage bonuses can occur when you qualify for tax deductions or credits as a couple that you wouldn’t get as 2 singles.
Most couples who file jointly get a marriage bonus and pay less tax than they would if they weren’t married.
5 Financial Benefits of Getting Married
I’d recommend that Jenna find out whether she and her fiancé will get a marriage tax penalty or bonus by using the Marriage Bonus and Penalty Tax Calculator at taxpolicycenter.org.
Fortunately, a study from the Congressional Budget Office (CBO)opens PDF file showed good news: Most couples who file jointly get a marriage bonus and pay less tax than they would if they weren’t married.
Here are 5 benefits you get from being married:
1.   Spousal IRA – is an individual retirement account (IRA) that one spouse is allowed to fund for another who doesn’t earn income, when you file jointly. On the other hand, a single filer without income never qualifies for an IRA.
Having an IRA allows a married person to save up to $5,500 (or $6,500 if you’re 50 or older) for 2013 or 2014 and cut their taxes, even if he or she is out of work or is a stay-at-home parent.
2.   Estate tax exclusion – allows a surviving spouse to transfer an unlimited amount of assets into his or her name without any federal tax penalty. Generally, heirs must pay tax when they inherit assets valued over a certain amount. So, the assets may eventually be taxed when they are distributed to heirs of a surviving spouse.
3.   Home sale exclusion – allows you to avoid paying tax on up to $250,000 of profit on your primary residence. But a married couple gets a tax break that’s twice as large, or $500,000. Even a surviving spouse can claim the entire $500,000 exclusion on gains from the sale of his or her main home.
4.   Tax deductions – based on income (such as for charitable contributions) may make it easier for dual-income couples to claim them. Additionally, some tax credits are only available to a married couple when they file a joint tax return.
5.   Workplace benefits – such as health insurance, medical savings accounts, and life insurance may be richer or cost less for a couple than individually. If both spouses have benefits packages at work, the right mixture from 2 plans can be more valuable than having only one plan to choose from.
Financial Disadvantages of Getting Married
There are drawbacks to filing taxes as a couple. The biggest one is that signing your name on a joint tax return makes you completely responsible for it. Â
Even if you didn’t personally crunch the numbers or know anything about mistakes your spouse may have made completing a return, you’re generally on the hook. Each partner accepts equal responsibility for any additional tax or penalties that may arise from problems with the return.
See also: How Does Marital Status Affect Your Taxes?
How to Save Money on Income Taxes
If you’re already married, you can’t go back in time and file taxes as 2 singles—only as married filing jointly or married filing separately. You or your accountant should calculate them each way each year and choose the filing status that saves you the most. Always consult with a qualified tax professional when you have a complex situation or have questions.
And if you’re newly married make sure to complete a new Form W-4, Employee’s Withholding Allowance Certificateopens PDF file , for your employer. You can use the IRS Withholding Calculator at irs.gov to help you figure the right amount and make sure that you don’t have too much or too little taxes withheld throughout the year.
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About the Author
Laura Adams received an MBA from the University of Florida. She’s an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura’s previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.