The Marriage Penalty

June is wedding month.  When planning to marry, the happy couple has many things to consider.  Very likely, not on that list are the tax implications of their new tax status “married filing jointly”.  But perhaps they have heard of the “Marriage Penalty” as regards taxes.  Certainly, the decision to marry should not be based on US tax law.  But knowledge of the consequences is important for planning.

What is the Marriage Penalty?  The marriage penalty refers to higher taxes levied when a couple is married then the total of the taxes they would have paid as individuals.  In fact, filing a joint tax return can have a negative effect, penalty, or a positive effect, bonus, depending on the income and deductions for the individuals getting married.  Generally, lower and middle income individuals do not get hit with the penalty.  Higher income couples usually will pay more taxes filing jointly then if they remained single and filed individually. This occurs because the tax code is progressive, with marginal tax rates rising as income rises and because the tax brackets for married are less than twice the span of the brackets for single filers.   For 2013, the rates go up to 39.6%.  Remember the marginal rate applies to the income within the bracket. A married couple must file “married filing jointly” or “married filing separately”.  Married filing separately has the highest tax; the brackets are narrower than single status.