Is there a marriage penalty that would raise your federal and state taxes if you decided to tie the knot? It’s unpleasant to think about, and few people are comfortable with the idea of letting taxes influence a decision as profound as whether or not to marry the person you love.
Let’s say you’re going to get married no matter how it affects your taxes. That’s a perfectly valid decision—marriage has emotional, social, health, and financial benefits, after all. But you should at least know if your tax bill will go up or down after marriage so you can be prepared. So here's the answer:
Yes, there is still a marriage penalty, and it can be as high as 12% of a couple’s income if the couple has children and up to 4% if they don’t, according to the Tax Foundation, whose model assumes taxpayers use the standard deduction and report only wage income. But it doesn't hit every couple, and some even get a bonus.
- After marrying, some couples will take a tax hit, others will enjoy a marriage bonus, and the rest will see little to no change in their taxes.
- High and low earners and couples with similar incomes are more likely to experience a marriage penalty.
- Couples with disparate incomes are more likely to experience a marriage bonus.
- Middle-income earners are less likely to experience either a marriage penalty or a marriage bonus.
Marriage Penalty Scenarios
Whether a marriage penalty will apply to your taxes depends on your specific circumstances—especially your and your spouse’s individual and combined incomes, the disparity between your incomes, and how many children you have. Here are a number of common situations in which the marriage penalty might hit you.
Low Earners with Similar Incomes
Low earners often qualify for the earned income tax credit, which was designed to encourage work by providing a credit of up to $6,431 based on filing status and the number of children you’re eligible to claim. When marriage increases a low-earning partner’s household income, the EITC may decrease or phase out completely. The couple may then have a lower after-tax income if they marry than if they had remained single.
High-earning couples may have the luxury of ignoring any tax penalty and marrying anyway. But some low-earning couples may find the hit too big and decide not to wed. Here’s the crux of the problem: To qualify for the EITC, the income limits for married taxpayers are not double those for single taxpayers. For example, the limit is $40,320 for a single taxpayer with one qualifying child, but only $46,010 for married taxpayers with one qualifying child.
Doing the extra work to estimate how your tax liability could change as a married couple is a pain. But it’s not as much of a pain as getting a surprise tax bill in April. Before you get married, do the math.
High Earners with Similar Incomes
Couples who jointly earn between $612,350 and $1,020,600 will pay higher taxes if they marry because the 37% federal tax bracket for married couples filing jointly is not twice as large as the tax bracket for unmarried individuals. The 37% federal income tax rate kicks in for income over $510,300 for singles but for income over $612,350 for married couples filing jointly. More of a high-earning couple’s income gets pushed into the 37% tax bracket when they marry. More of it stays in the 35% tax bracket if they don’t.
High Earners Hit with the Medicare Surtax
The Medicare surtax of 0.9% applies to wages, compensation, and self-employment income over $200,000 for single taxpayers and $250,000 for married taxpayers. A marriage penalty therefore applies to couples earning $250,000 to $400,000 because the tax threshold for married taxpayers is not double the threshold for singles. Are you noticing a pattern?
High Earners Hit with the Net Investment Income Tax
A net investment income tax (NIIT) of 3.8% applies to passive income such as interest, dividends, capital gains, and rental income, after subtracting investment expenses such as interest, brokerage fees, and tax preparation fees.
Like the Medicare surtax, you’ll have to pay the NIIT if your modified adjusted gross income (MAGI) exceeds $200,000 and you’re single or it exceeds $250,000 and you’re married filing jointly. Here again, a marriage penalty applies to couples earning $250,000 to $400,000. The difference is that this tax applies to net investment income, not to earned income.
High Earners with Long-Term Capital Gains
Long-term capital gains on investments held longer than a year is another area where the married filing jointly bracket ($488,850) is not double the single bracket ($434,550). Thus, high-earning taxpayers with capital gains will experience a marriage penalty in that they pay a capital gains tax rate of 20% when their income exceeds $488,850—not $869,100, which is double the single threshold. High-earning married taxpayers can see more of their capital gains taxed at 20% instead of 15% as a result.
Homeowners with Large Mortgages
Suppose you have a $1,500,000 mortgage. Admittedly, most people can’t afford to buy this much house, but suppose you and your fiancé are both doctors. As single taxpayers, you can each deduct the interest on $750,000 of mortgage debt. As married taxpayers, you can still only deduct the interest on $750,000 of mortgage debt. In addition, since the standard deduction for married couples is $24,000 while the standard deduction for singles is $12,000, there’s a higher barrier for married couples to overcome before deducting mortgage interest pays off.
Residents of States and Localities with High Income and Property Taxes
Since the Tax Cuts and Jobs Act went into effect for the 2018 tax year, both single and married taxpayers can’t claim more than $10,000 in itemized deductions for state and local taxes, a category that includes both income and property taxes. As a result, if you and your betrothed were previously itemizing and each taking this deduction, you could lose out substantially after marriage. The government could fix this problem by doubling the SALT limit to $20,000 for couples who are married and file jointly, but don’t hold your breath waiting for that to happen.
It's Not Just a Federal Penalty
Marriage penalties aren’t just a federal thing. According to the Tax Foundation, these 15 states had a marriage penalty as of July 1, 2018, because their income tax brackets for married couples who file jointly are not twice as large as the brackets for single filers:
- New Mexico
- New Jersey
- New York
- North Dakota
- Rhode Island
- South Carolina
The Marriage Bonus
Not every couple suffers a penalty when they marry. Getting married and filing taxes jointly can result in a marriage bonus of up to 21% of a couple’s income if the couple has children and up to 8% if they don’t, the Tax Foundation says. This bonus commonly occurs when one partner’s income is much higher than the other’s. As a married couple filing jointly, the lower-earning spouse’s income doesn’t push the couple into a higher tax bracket; instead, the couple benefits from the wider tax bracket that applies to married couples and may pay taxes at a lower rate.
In addition, the lower-earning spouse can receive contributions to a spousal IRA from the higher earning spouse (subject to income limits that phase out IRA contributions). The Tax Foundation finds that couples with combined incomes of $40,000 to $150,000 are less likely to experience a significant marriage penalty or bonus.
The marriage bonus can offset part of a marriage penalty that might apply to you, meaning that marriage keeps your tax liability similar to your unmarried tax liability. You might, for example, experience a marriage penalty from not being able to itemize your state and local property taxes, but a marriage bonus from a wider tax bracket. The Tax Policy Center’s Marriage Calculator can help you determine whether a marriage penalty or marriage bonus might apply to you.
The Futility of Getting Married and Filing Separately
So why not just file separately? While the IRS does allow taxpayers to get married and file separately, the main benefits of going this route are that neither spouse will be liable for lies or mistakes on the other’s tax return and that couples with significant medical deductions may find it easier to claim those deductions. Popular credits and deductions become unavailable when a married couple files separate tax returns, income phaseouts for IRA contributions are lower, and the 37% tax bracket kicks in earlier.
The Bottom Line
Should you decide not to legally wed (or even to divorce!) because of the tax penalty, you’ll need to take extra steps in your financial and medical planning, similar to what same-sex couples had to do before marriage became legal.
That being said, few couples base their marriage decision on taxes. A more common outcome is that once a couple marries, taxes can affect how much each spouse works. The higher-earning spouse is motivated to work slightly more (0.1% to 0.3%) while the lower-earning spouse is motivated to work significantly less (7%), according to a Congressional Budget Office study. Social Security taxes and benefits also affect married and single taxpayers differently, an issue too complex to go into here.
In numerous ways, the tax code still isn’t neutral on marriage—even after the Tax Cuts and Jobs Act expanded the married filing jointly tax brackets for all but the top tier of taxpayers. That means couples need to calculate how their tax liability will change after marriage and plan accordingly.