Marriage Tax

Written By
Paul Tracy
Updated November 4, 2020

What is a Marriage Tax?

The marriage tax, also known as the "marriage penalty," refers to the higher taxes a couple pays when they file a joint tax return versus the amount a couple pays when filing two separate tax returns.

How Does a Marriage Tax Work?

The marriage tax was created in 1969, when Congress attempted to give a tax advantage to married couples. The legislation was passed when a single large income or two disparate incomes for a household were common.  However, the new tax advantage transformed from a benefit into a penalty as more marriages and households became dual-income.

There are still tax benefits to filing jointly for married couples with only one income. But if both spouses earn income, the likelihood of being hit with the marriage tax penalty increases for those who must file a joint return

Illustrated in Figure 1 below is a hypothetical comparison of the marriage tax penalty for a couple with two children. Under the sub-head "Couple filing separately," the example shows the man's income taxed as "married filing separately" while the woman files as "head of the household."  As the head of a household with children, in this example the woman can claim more personal exemptions. 

The final tax liability of the separate filings is then compared to what the couple would pay in taxes if they filed jointly.

The comparison result in Figure 1 shows that our hypothetical couple paid $4,561 more in taxes with a joint filing, compared to a "married filing separately" option. They were also hit with the alternative minimum tax (AMT). The marriage tax penalty ends up being 2.3% of the couple's adjusted gross income.

Recent measures have been made to alleviate or even eliminate the marriage tax penalty. The Jobs and Growth Tax Relief Reconciliation Act of 2003 reduces the impact of the marriage tax penalty by making the standard deduction the same for singles and married couples and by increasing the higher end of the 15% tax bracket for married couples filing jointly. 

Why Does a Marriage Tax Matter?

For 2010, the marriage tax penalty kicks in when each spouse earns over $68,650 -- moving the married couple both up to the 28% tax bracket. As a single filer, you would remain in the 25% tax bracket until your income climbs above $82,400. The marriage tax penalty only gets more severe for higher income marriages.

Some argue that the marriage tax penalty is more than offset by the economics of marriage. Housing and food costs for a married couple, for example, are generally less than those of two individuals living separately. 

At the end of the day, however, taxpayers do not have a lot of discretion when it comes to deciding whether they file jointly or separately.

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