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tax topics

Marriage Penalty

  • A “marriage penalty” occurs in the tax system when a wife and husband pay more income tax filing jointly as a couple than they would if they had remained single and filed as individuals. Conversely, a “marriage bonus” occurs if a couple pays less tax filing jointly than they would if they were not married and filed singly. Couples with marriage bonuses far outnumber those incurring marriage penalties but precise estimates are not available.
    Source: For Better or for Worse: Marriage and the Federal Income
  • Marriage penalties and bonuses result from the combination of progressive tax rates and taxation of a married couple as a single tax unit. With progressive taxes (which impose higher rates on higher incomes), combining spouses’ incomes can result in some income incurring higher rates than if incomes were taxed separately, but only if joint tax brackets are less than twice as wide as individual brackets.
  • Couples in which spouses have similar incomes are most likely to incur marriage penalties. Couples in which one spouse earns all of the couple’s income never incur a marriage penalty and almost always receive a marriage bonus.
  • Marriage penalties are not confined to the tax system. Married couples often receive lower benefits from government programs than they would if they had not married.
    Source: The Widespread Prevalence of Marriage Penalties
  • undefinedTax legislation since 2001 has substantially reduced marriage penalties and increased marriage bonuses by raising the standard deduction for couples to twice that for single filers and by setting the income range of 10 and 15 percent tax brackets for couples to twice that for individuals. Legislation also raised the starting point for the EITC phaseout range by $3,000 for married couples.
    Source: Major Enacted Tax Legislation Since 2000
  • Marriage penalty relief is costly. The TPC estimates that extending the marriage penalty reductions from their scheduled sunset in 2010 through 2017 would cost more than $130 billion. Much of the cost results from raising marriage bonuses.
    Source: Table T07-0026 - Extend Marriage Penalty Relief
  • Much of the benefit of marriage penalty relief goes to the wealthiest taxpayers. According to TPC estimates, the average taxpayer in the top income quintile will receive $1, 064 in 2010 due to marriage penalty tax cuts, compared to just an $83 benefit for middle quintile taxpayers. Proportional to income, marriage penalty relief affects taxpayers similarly; the marriage penalty cuts taxes by about 1 percent across all income quintiles.
    Source: Table T07-0028 - Extend Marriage Penalty Relief, Pre-EGTRRA Baseline with AMT Fix
  • Despite the recent reductions, many aspects of the tax code perpetuate penalties. For example, joint filer brackets for tax rates above 15 percent are not twice as wide as single brackets; income limits on some tax subsidies are less than twice as high for couples as for single filers; and alternative minimum tax (AMT) parameters for couples are the same as or less than twice those for unmarried individuals.
  • Taxpayers who might qualify for the earned income tax credit (EITC) can suffer particularly large marriage penalties if the income of one spouse disqualifies the other from getting the credit. At the same time, marriage can increase the EITC if a nonworking parent marries a low-earning worker.
    Source: The Hefty Penalty on Marriage Facing Many Households with Children

Additional information on the marriage penalty:

To learn more about how the marriage penalty affects cohabitating parents, see Taxes and Marriage for Cohabiting Parents by Elaine Maag, 2005.

For discussion of how tax code affects married couples with children, see The True Tax Rates Confronting Families With Children, by Adam Carasso and Eugene Steuerle, 2005.

For a brief discussion of how marriage penalty relief subjects millions of couples to the alternative minimum tax, see Marriage Penalty Relief Throws Millions Onto the AMT by Leonard Burman, 2004.

For a detailed explanation of how the 2001 tax cuts affected married couples, see Saying 'I Do' after the 2001 Tax Cuts by Adam Carasso and Eugene Steuerle, 2002.