What Is the Marriage Penalty and How Does It Work?
Explore how the U.S. tax code can alter a couple's total tax liability after marriage, sometimes resulting in a higher or lower overall payment.
The marriage penalty is a feature of the U.S. tax code where a married couple’s combined tax bill is higher than it would have been if they had stayed single and filed as individuals. This is not a literal fee but a consequence of how the tax system is structured, often arising when two individuals with similar incomes marry.
How the Tax Code Creates a Marriage Penalty
The primary drivers of the marriage penalty are tax brackets and various deduction limitations. When two individuals with comparable incomes marry, their combined earnings can push them into a higher tax bracket more quickly than if they had filed as single individuals. This interaction is a cause of the increased tax liability that many dual-income households experience after marriage.
The progressive nature of the tax system means that as income rises, it is taxed at higher rates. For most income levels, the tax brackets for those who are married filing jointly (MFJ) are double the brackets for single filers. However, this is not true for the highest income bracket. For the 2024 tax year, the top federal tax rate of 37% applies to taxable income over $609,350 for single filers, but it kicks in at $731,200 for married couples filing jointly, which is far less than double the single threshold.
For example, consider two individuals each with $400,000 of taxable income. As single filers, a portion of their income falls into the 35% tax bracket. When they marry, their combined income of $800,000 pushes a portion of their earnings into the 37% bracket, resulting in a higher total tax liability than the sum of their two individual tax bills.
Another factor is the limitation on certain itemized deductions. The state and local tax (SALT) deduction is capped at $10,000 per household, which is the same for a single individual as it is for a married couple. Two unmarried individuals could each claim a $10,000 SALT deduction for a total of $20,000, but once married, they are limited to a single $10,000 deduction. Other tax provisions, such as the income thresholds for the 3.8% Net Investment Income Tax, are also not doubled for married couples.
Understanding the Marriage Bonus
In contrast to the penalty, the tax code can also produce a “marriage bonus,” where a couple pays less in combined taxes after marrying. This scenario typically happens when there is a wide gap between the two spouses’ incomes, such as in single-earner households.
The bonus arises because the higher-earning spouse can use the lower tax brackets and standard deduction of the lower-earning spouse. When filing a joint return, the couple’s incomes are combined, and the tax is calculated on the total. This allows the higher income to be spread across wider tax brackets, pulling some of it out of higher tax rates.
For instance, an individual earning $110,000 who marries someone with no income would see their income subject to the married filing jointly tax brackets. This can place them in a lower tax bracket than they would have been in as a single filer. The couple also benefits from the full standard deduction for a married couple, which is double the single amount, further reducing their taxable income.
Strategic Tax Planning for Married Couples
Couples can explore different filing options, but the choice between Married Filing Jointly (MFJ) and Married Filing Separately (MFS) has consequences. While filing separately might seem like a way to avoid the marriage penalty, it is rarely the better option. The MFS status disqualifies taxpayers from many tax deductions and credits, often leading to a higher tax bill.
Taxpayers who file separately generally cannot claim the Earned Income Tax Credit, education credits, or the deduction for student loan interest. If one spouse itemizes deductions, the other spouse must also itemize and cannot take the standard deduction. The income phase-out ranges for many credits and deductions are also much lower for MFS filers.
A practical strategy for managing the marriage penalty is to adjust tax withholding. For dual-income couples, it is important to ensure enough tax is withheld from paychecks to cover their combined liability. An unexpected tax bill can result from both spouses filling out their withholding forms as if they were single earners, leading to under-withholding.
To correct this, couples should review and update their Form W-4, Employee’s Withholding Certificate, with their employers. The form includes a “Multiple Jobs or Spouse Works” section for this purpose. The IRS also provides an online Tax Withholding Estimator, which helps couples determine the amount of tax to have withheld from each paycheck.