As St. Valentine’s Day rolls around this year, the Tax Policy Center has once again done its part for romance by rolling out a completely revised Marriage Bonus and Penalty Calculator. Like previous versions, the calculator shows how much less—or more—a couple would pay in federal income taxes if they marry rather than staying single. Marriage gives most couples a tax cut but it can also boost a couple’s tax bill, sometimes by a lot.
A hundred years ago when the income tax was brand new, marriage had no effect on tax bills. The few people who had enough income to owe tax filed as individuals—joint filing wasn’t an option. But a couple of Supreme Court decisions, expansion of the income tax during World War II, and new state laws allowing couples to split income for tax purposes led Congress to craft a new filing status for married couples in 1948. Joint filing combined with progressive tax rates to create marriage bonuses for many couples—marriage caused their tax bills to go down, especially if only one spouse had earnings.
A couple of decades later, in response to war widows complaining that the tax code discriminated against single people, Congress tweaked tax brackets and other tax provisions in ways that led to marriage penalties for some married couples—they paid more tax than they would if they remained single. (You can find a history of marriage bonuses and penalties and an explanation of what causes them here.)
The new calculator offers a simpler—and more modern looking—way to enter required data. Separate sections ask about the number of children the couple has (and costs of childcare), income each person gets from various sources, and deductible expenses (for those who choose not to take the standard deduction). Hit “Calculate” and you learn whether marriage would raise or lower the couple’s tax bill. And if you really want to get down into the weeds, you can click another button to see details of the tax calculations.
In general, marriage penalties occur most often when two people have similar incomes. In contrast, one-earner couples almost always get bonuses, as do most couples where individual incomes differ substantially.
Research suggests that marriage bonuses and penalties have only minor effects on couples’ decisions to marry or remain single. That’s probably a good thing. After all, romance is a much better basis for a successful marriage than the dismal science of economics.
