What Is the Marriage Penalty?
The Tax Cuts and Jobs Act affected a variety of calculations, and the tax liability differences between married and single taxpayers is a complex story. As the Tax Foundation notes: "One unintended feature of the United States' income tax system is that the combined tax liability of a married couple may be higher or lower than their combined tax burden if they had remained single. This is called the marriage penalty or marriage bonus."
Depending on your income, the credits or deductions you can use and where you live, you still could pay higher taxes by getting married. It's more typical for newlyweds to see a marriage bonus, but there are tax provisions that are not adjusted for marriage.
Before the new tax law, a larger swath of taxpayers faced higher tax bills after marriage. But when two people with identical or similar incomes get married, the tax code still can cause married couples to owe more than had they remained single.
For single filers, the top federal tax rate of 37 percent applies for those with incomes of more than $500,000. For married couples, the rate is applied to income over $600,000. If your income is exactly $500,000, you'll pay 35 percent as a single filer. But if two individuals who each make $500,000 marry and combine their incomes for a total $1 million, they pay 37 percent on the $400,000 that's over the $600,000 threshold. That means paying $8,000 more in income taxes than single filers.
There are other ways to generate a higher tax bill: You may have up to $200,000 in income before the Medicare surtax of 0.9 percent kicks in, but if you're married, that ceiling is $250,000. Also, the new limit on state and local tax deductions is not doubled for married couples: The $10,000 cap applies to single and married filers. Married couples filing separately get $5,000 for each deduction.
On the other end of the earnings spectrum, a marriage penalty can come from the earned income tax credit. Typically, the credit is available to working taxpayers with children if they meet income limits and other requirements. However, the income limits associated with the tax break aren't doubled for married couples. So, two people with incomes of $25,000 each and one child would pay $3,117 less in taxes if they remained unmarried.
Married retirees on Social Security also face tax implications. For single filers, if the total of your adjusted gross income, nontaxable interest and half your Social Security benefits is under $25,000, you don't owe taxes on these benefits. But, for married couples filing a joint return, the threshold is $32,000 instead of double the amount for individuals.
And at the state level, the marriage penalty can be more pronounced: A top rate of 5.75 percent in Maryland applies to income above $250,000 for single filers, but $300,000 for married couples.
This is just a general introduction to a complicated issue, and single or married, there are a lot of factors that can affect your tax liabilities. Be sure to get professional advice tailored to your circumstances.