The marriage penalty is the increase in a married couple’s joint tax liability over what would have been their combined tax liability as two individual filers. Not all married couples experience a marriage penalty when filing jointly.
Learn more about what the marriage penalty is and how to calculate it.
Definition and Examples of the Marriage Penalty
The marriage penalty is the increased taxes some married couples owe over the amount of taxes they would have owed if they were not married. The marriage penalty can be the result of disparate tax rates between individual and married taxpayers at certain levels of income. It also results from the tax code implementing the same limitation on certain tax benefits for both individual and married taxpayers, or both those situations.
- Alternate definition: Although the marriage penalty is generally referred to in an income tax context, there are marriage penalties in non-tax matters, as well. For example, under current rules, supplemental security income (SSI) benefits are sometimes reduced when individuals receiving benefits marry and file jointly.
High-income couples in which each spouse makes a similar amount of money often face a marriage penalty. To figure out the penalty, first determine the taxes owed by each taxpayer individually based on the IRS tax brackets, then calculate how much is owed when they file jointly.
For instance, let’s say one spouse earns $325,000 a year, the other spouse earns $400,000 a year, and they file their taxes jointly. If they take the standard deduction (and no other deductions or credits), their marginal tax rate would be 37% and their joint tax liability for tax year 2021 would be $195,486. See how this example is calculated in the tables below.
|Spouse A Single||Spouse B Single||Married Filing Jointly|
|Adjusted Gross Income (AGI)||$325,000||$400,000||$725,000|
|2021 IRS Tax Rates|
|Tax Rate||For Single Individuals||For Married Individuals Filing Joint Returns||For Heads of Household||Tax Owed by Single Filers||Tax Owed by Married Individuals Filing Jointly||Tax Owed by Heads of Household|
|10%||Up to $9,950||Up to $19,900||Up to $14,200||$995||$995||$1,990|
|12%||$9,951 to $40,525||$19,901 to $81,050||$14,201 to $54,200||$3,669||$3,669||$7,338|
|22%||$40,526 to $86,375||$81,051 to $172,750||$54,201 to $86,350||$10,087||$10,087||$20,174|
|24%||$86,376 to $164,925||$172,751 to $329,850||$86,351 to $164,900||$18,852||$18,852||$37,704|
|32%||$164,926 to $209,425||$329,851 to $418,850||$164,901 to $209,400||$14,240||$14,240||$28,480|
|35%||$209,426 to $523,600||$418,851 to $628,300||$209,401 to $523,600||$36,059||$62,309||$73,308|
|37%||$523,601 or more||$628,301 or more||$523,601 or more||No income in this bracket||No income in this bracket||$26,492|
|Total Tax Owed:||$83,902||$110,152||$195,486|
However, if these taxpayers had not been married and had filed as single individuals, each of their marginal tax rates would be 35% and their combined tax liability for tax year 2021 would be $194,054. (See table below.) This couple’s marriage penalty is the $1,432 increase in their joint tax liability over their hypothetical combined tax liability if they were each single.
|Spouse A Income||Spouse B Income||Combined Tax Liability If Single||Joint Tax Liability If Married Filing Jointly|
How Does the Marriage Penalty Work?
The marriage penalty is largely the result of the tax code not simply doubling certain amounts for married taxpayers filing jointly.
For example, let’s consider the two highest tax brackets. The tax code does not exactly double the single tax brackets to derive the brackets for married couples filing jointly. This is why the marriage penalty, at least with respect to tax rates, generally affects high-earning couples where each spouse makes a similar income to the other.
In other instances, the marriage penalty does not have to do with tax rates but with limitations on certain deductions or credits not being doubled for married taxpayers filing jointly. In these cases, taxpayers with lower incomes could experience a marriage penalty, as well.
For tax purposes, your marital status for the year is determined by whether you’re legally married as of Dec. 31. So if you’re planning your wedding for the end of the year, consider running the numbers with your spouse-to-be to determine if it would be better to get married in January. This would help you avoid the marriage penalty for one more tax year.
Types of Marriage Penalties
While the most common type of marriage penalty involves tax rates, other types involve limitations by the amount placed by the tax code on certain tax benefits. Here are some of the other marriage penalties.
Tax-Rate Marriage Penalty
Up to a certain income level, the income tax brackets for married couples filing jointly are exactly double that of single taxpayers. However, in the 35% and 37% brackets, this is not the case, as the table below shows.
|Tax Rate||Tax Bracket for Single Individuals||Tax Bracket for Married Individuals Filing Jointly||Is the Married-Filing-Jointly Tax Bracket Exactly Double the Single Tax Bracket?|
|10%||$0 - $9,950||$0 - $19,900||Yes|
|12%||$9,951 - $40,525||$19,901 - $81,050||Yes|
|22%||$40,526 - $86,375||$81,051 - $172,750||Yes|
|24%||$86,376 - $164,925||$172,751 - $329,850||Yes|
|32%||$164,926 - $209,425||$329,851 - $418,850||Yes|
|35%||$209,426 - $523,600||$418,851 - $628,300||No|
This means that two taxpayers who were each in the 35% bracket individually could, upon getting married and filing a joint tax return, have some of their income taxed at 37%.
|Spouse A Income||Spouse B Income||Marginal Tax Rates for Both Spouses If Single||Marginal Tax Rate If Married Filing Jointly|
Excess Capital Loss Marriage Penalty
Both single taxpayers and married taxpayers filing jointly may only deduct, on an annual basis, up to $3,000 of capital losses above their capital gains against their ordinary income. The excess capital loss above $3,000 is carried forward indefinitely to future tax years.
This means that each spouse, if unmarried, would individually be able to deduct up to $3,000 in excess capital losses per year, for a total of $6,000 between them. However, they would be limited to a $3,000 capital loss on their joint tax return.
|Spouse A Excess Capital Loss||Spouse B Excess Capital Loss||Combined Deductions If Single||Joint Deduction If Married Filing Jointly|
Rental Real Estate Loss Marriage Penalty
Both single taxpayers and married taxpayers filing jointly who do not qualify for real estate professional status may only deduct against their notes up to $25,000 per year in rental losses from real estate activities they actively participated in. Any remaining loss becomes a passive activity loss that is carried forward indefinitely to future tax years.
Additionally, for both single taxpayers and married taxpayers filing jointly, this $25,000 allowance phases out by 50 cents on the dollar for each dollar of their modified adjusted gross income in excess of $100,000. So when their modified adjusted gross income exceeds $150,000, they are no longer eligible to deduct any rental losses against their nonpassive income.
As a result, two spouses each earning $100,000 a year each could, if they were unmarried, each deduct up to $25,000 in rental losses against their nonpassive income. However, they could not deduct any rental losses against their nonpassive income on their joint tax return because their joint income would exceed $150,000.
|Spouse A Income||Spouse B Income||Combined Maximum Rental Loss Deduction If Single||Joint Maximum Rental Loss Deduction If Married and Filing Jointly|
State and Local Tax Deduction Marriage Penalty
Single taxpayers and married taxpayers filing jointly may only take an itemized deduction up to $10,000 for state and local income, sales, and property taxes paid. This is commonly known as the SALT deduction.
Unlike capital losses and real estate losses, excess SALT deductions are not carried to future tax years; they are lost forever.
This means that each spouse, if unmarried, would individually be able to take up to a $10,000 SALT deduction provided that each person itemized their deductions, for a total of $20,000 between them. However, they are limited to a $10,000 SALT deduction on their joint tax return.
|Spouse A State and Local Taxes Paid||Spouse B State and Local Taxes Paid||Combined SALT Deduction If Single||Joint SALT Deduction If Married and Filing Jointly|
Earned Income Tax Credit Marriage Penalty
In addition, the maximum income limitations for individual filers to claim the earned income tax credit (EITC) are not doubled for married couples filing jointly. The table below shows how the credit is allocated.
|Children or Relatives Claimed||Maximum Adjusted Gross Income for Individual Filers||Maximum Adjusted Gross Income for Married Couples Filing Jointly|
The earned income tax credit is a benefit for low-income taxpayers, as illustrated by the following example.
Two spouses each earning $15,000 a year with no dependents could, if unmarried, each be eligible for the earned income tax credit. But as a married couple filing jointly, they would not be eligible for the credit because their joint income would exceed $21,920.
Filing separately would not help them, either, because the earned income tax credit cannot be claimed by taxpayers using the married filing separately tax status.
State Tax Marriage Penalty
State income tax rates and laws often differ from the federal income tax rates and laws. Therefore, it is possible for a couple to experience a marriage penalty for state tax purposes but not for federal tax purposes, and vice versa.
For example, none of Minnesota’s income tax brackets for single taxpayers are doubled for married taxpayers filing jointly. This means that many married Minnesota couples with both spouses making similar income exceeding $19,905 each will experience a marriage penalty for state income tax purposes.
Marriage Penalty vs. Marriage Bonus
Sometimes, however, married couples pay less in taxes than they would have paid if they had remained unmarried. Instead of experiencing a marriage penalty, then, these couples experience a marriage bonus.
Couples in which one spouse would, if single, be in a high tax bracket while the other spouse would, if single, be in a low tax bracket often experience a marriage bonus.
This is because often in this situation, the taxpayers’ marginal tax rate as a married couple filing jointly is lower than the higher-income spouse’s tax bracket as an individual.
Their joint marginal tax rate may, of course, be higher than the lower-income spouse’s tax bracket as an individual. However, the effect of a lower rate on the higher-earning spouse’s income is greater than the effect of a higher rate on the lower-earning spouse’s income, simply because the higher-earning spouse makes more money.
For example, let's say one spouse in a marriage earns $300,000 a year, the other spouse earns $30,000 a year, and they file their taxes jointly. If they take the standard deduction (and no other deductions or credits), their marginal tax rate would be 24% and their joint tax liability for tax year 2021 would be $61,218.
However, if these taxpayers had not been married and had each filed as single individuals, the higher-earning spouse’s marginal tax rate would be 35% and the lower-earning spouse’s marginal tax rate would be 12%. Their combined tax liability for tax year 2021 would be $77,047.
This couple’s marriage bonus is the $15,829 decrease in their joint tax liability of $61,218 from their hypothetical combined tax liability of $77,047 had they each filed as single taxpayers.
|Combined Tax as Single Filers||$77,047|
|Tax as Married Couple||$61,218|
Criticism of the Marriage Penalty
One criticism of the marriage penalty is that it doesn’t provide an incentive for marriage for the couples who would be affected by it.
While a marriage penalty of a few thousand dollars for high-income couples may not be material to their financial situation, the effect may be felt more strongly by lower-income couples who miss out on the earned income tax credit as a result of getting married.
- The marriage penalty is the increase in a married couple’s joint tax liability over what would have been their combined tax liability as two individual filers.
- The marriage penalty is generally caused by the tax code not exactly doubling certain amounts for married taxpayers filing jointly.
- While the tax-rate marriage penalty affects high-income taxpayers who marry, other kinds of marriage penalties can affect lower-income taxpayers, as well.
- Some married taxpayers experience a marriage bonus, in which their joint tax liability is less than their combined tax liabilities would have been if they had remained unmarried.