Effects of Marriage on Tax Burden Vary Greatly with Income Level, Equality

January 21, 2013

The marriage penalty is not as one-sided as is usually reported. In fact, in certain instances, marriage can actually lead to a tax bonus. The effects of marriage boil down to the interaction between total wage income for a household and how equitable the two spouses' incomes are, says Nick Kasprak, a programmer and analyst for the Tax Foundation.

  • Couples whose incomes are far from equal typically benefit from a marriage tax bonus.
  • Partners whose incomes are similar or equal generally suffer a marriage tax penalty.
  • Following marriage or a spouse reentering the workforce, additional tax liabilities may be assessed if the couple enters a higher marginal tax rate.

When a couple's income is largely unequal, the second earner's additional income will not typically be large enough to raise the couple into a higher tax bracket. But for two-earner couples whose wages are similar, the relatively equal wage incomes will raise the marginal tax rate on the second salary by a substantial amount.

Marriage penalties frequently affect low income couples because of the Earned Income Tax Credit (EITC).

  • For a low-income couple where each spouse earns $7,500, filing a joint return results in a $620 marriage penalty because the EITC decreases substantially as the total taxable income increases on the joint return.
  • For a middle-income couple where one spouse earns $80,000 and the other spouse earns $20,000, filing a joint return results in a $2,616 marriage bonus because there is no penalty for joint filers in the tax brackets at or below the 25 percent level.
  • For a high-income couple both earning $350,000, joint filing results in a $26,642 marriage penalty because their marginal tax rates start at incomes below what they would start at if they filed individually.

Source: Nick Kasprak, "Effects of Marriage on Tax Burden Vary Greatly with Income Level, Equality," Tax Foundation, January 10, 2013.

 

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