The marriage tax in the U.S. refers to the potential increase in taxes that some married couples face when they file their taxes jointly compared to if they were to file as two single individuals. This phenomenon is also sometimes referred to as the “marriage penalty.” Conversely, some couples may experience a “marriage bonus,” where they pay less in taxes when filing jointly than they would if they were single.

Key Concepts:

1. Marriage Penalty:

   • The marriage penalty occurs when a couple pays more in taxes by filing jointly than they would if each partner filed as a single individual.
   • This typically happens when both spouses have similar incomes, especially if they are both high earners. When their incomes are combined, they may be pushed into a higher tax bracket, resulting in a higher overall tax liability.

2. Marriage Bonus:

   • A marriage bonus occurs when a couple pays less in taxes by filing jointly than they would if they filed as two single individuals.
   • This often happens when one spouse earns significantly more than the other or when one spouse has little to no income. In such cases, the lower-earning spouse’s income can help reduce the overall tax burden by keeping the couple in a lower tax bracket.

Factors Contributing to the Marriage Tax:

1. Tax Brackets:

• The U.S. federal income tax system uses progressive tax brackets, meaning that higher levels of income are taxed at higher rates.
• For married couples filing jointly, the tax brackets are not always exactly double those for single filers. As a result, some couples may find themselves in a higher tax bracket when they combine their incomes, leading to a marriage penalty.
• However, in some cases, the joint tax brackets can provide a benefit, particularly if one spouse earns significantly less or nothing at all, leading to a marriage bonus.

Example:

• In 2023, the 24% tax bracket for single filers starts at $95,376 of taxable income, while for married couples filing jointly, it starts at $190,751 (which is exactly double). However, for the 32% tax bracket, the threshold for singles is $182,101, and for married couples filing jointly, it’s $364,201 (again, double). But in some cases, especially at higher income levels, the brackets may not align perfectly, leading to penalties or bonuses.

2. Standard Deduction:

• The standard deduction for married couples filing jointly is double that of single filers, which can help reduce taxable income. For 2023, the standard deduction is $13,850 for single filers and $27,700 for married couples filing jointly.
• However, if both spouses itemize deductions, they may lose some benefits because they must choose the same filing status (either both itemize or both take the standard deduction).

3. Social Security and Medicare Taxes:

• Social Security and Medicare taxes (also known as FICA taxes) are not directly affected by marital status, but the way income is taxed can still impact married couples. For example, if both spouses earn high incomes, they may be subject to additional Medicare taxes (0.9% on earnings above certain thresholds).

4. Other Tax Provisions:

• Certain tax credits and deductions are phased out or limited based on income. For married couples, these phaseouts may occur at lower combined income levels than if the spouses were filing separately, potentially reducing the value of certain credits or deductions.
• Examples include:
  • Child Tax Credit: The phaseout for this credit begins at higher income levels for married couples, but it may still affect some high-earning couples.
  • Earned Income Tax Credit (EITC): The EITC is generally more beneficial for single filers with children than for married couples with similar incomes.

Recent Changes and Mitigation:

• Tax Cuts and Jobs Act (TCJA) of 2017: The TCJA made some changes to reduce the marriage penalty by adjusting tax brackets and increasing the standard deduction for married couples. However, the penalty still exists in certain situations, particularly for higher-income couples.

• Filing Separately: Some couples may choose to file separately to avoid the marriage penalty, but this often results in losing certain tax benefits, such as the ability to claim certain credits or deductions. Additionally, tax rates for married filing separately are generally less favorable than for those filing jointly.