The marriage tax benefit over the marriage penalty tax

When you get married, the transition from single to married has both legal and tax implications. Maybe you’ve come across the term “marriage penalty tax” and not known what it means, or maybe you’ve been wondering if your taxes change after getting married. 

This article will teach you what the marriage penalty tax is, highlight when you may owe more in taxes after tying the knot, or if you could actually receive a marriage tax benefit. 

After you get married, April showers usually brings a new question: should we file separately? Or jointly? Is one better than the other? Couples who owe more in total taxes when filing jointly vs filing individually experience a marriage penalty tax. Luckily, after the Tax Cut And Jobs Act of 2017, the marriage penalty tax was cleaned up which reduced the impact for most married couples.

Let's take a look at the 2024 income tax brackets released by the IRS to see where the marriage penalty tax currently kicks in. From the table below, we can also get an idea of how singles getting married can potentially save on taxes too. 

Before making any tax moves, please consult with a tax professional who can provide in-depth advice on your unique and individual circumstances. The information provided in this article is not tax advice and is offered for general educational purposes only. If you have tax-related questions or require assistance with tax preparation and filing, please consult a licensed tax professional or qualified attorney.

What does this mean for the 99%?

As a modern couple, there will probably be the normal question of whether we should file separately or jointly. If you’re under the $731,200 in taxable income like most of us, you’ll get the same taxation rate either way. That means the marriage penalty tax doesn’t apply.

Roughly 95% of married couples nowadays choose to file jointly. The tax code even encourages married couples to file together because in most cases it results in the equivalent or better tax advantages (especially once you take deductions or credits into account). Filing one tax return versus two also saves time and can result in fewer filing fees if you use tax software or hire a tax professional.

It’s also worth pointing out that each year, married couples can choose to file one joint tax return together or file two separate returns using married filing jointly status. Couples can flip flop between the two filing statuses from one tax year to the next as often as they choose. 

So does this mean there’s actually a marriage tax benefit?

So if most married couples don't pay a marriage penalty tax…. Is there a tax benefit? There is - and it occurs most often when one partner earns more than the other partner.

Marriage Tax Benefit Example #1: Big Income Differences

Let's say Sally makes $350,000 as an executive and meets John who makes $33,000 as a high school tennis coach. 

As a single person making $350,000, Sally is in the 35% marginal income tax bracket. However, if Sally marries John, their combined household income rises to $383,000, dropping them in the 24% marginal income tax bracket.

By marrying John, Sally saves herself about $11,882 in income taxes. Sure, John's income moves up from a 12% marginal tax rate to a 24% marginal tax rate. However, John's increase in income taxes is more than offset by a decrease in Sally's income taxes.

Marriage Tax Benefit Example #2: Stay At Home Parent

Let's say after grinding for 15 years in banking, Bob, 37, can no longer take it anymore. He plans to give up his $250,000 a year base salary job next year and backpack around Southeast Asia. 

While in Bali, Bob meets Nancy, 33, who is on a one-month sabbatical from her equally demanding job as a lawyer making $285,000 a year. 

Serendipitously, Bob and Nancy fall in love. Six months later, when they’re both back in San Francisco, Bob proposes and Nancy says “yes!”

By getting married, Nancy goes from a marginal income tax bracket of 35% down to 24% because Bob wants to be a stay-at-home dad. That’s right! Nancy is pregnant and expecting soon. 

By getting married, Nancy saves about $8,682 in income taxes. Bob and Nancy can now use the $8,682 to buy lots of diapers, bibs, formula, and onesies. 

For couples with widely divergent incomes or those considering having one partner stay at home to raise a family, there may be an additional tax benefit to getting married & filing jointly. 

Not only may you receive a marriage tax benefit after getting married, each of you will also be eligible to receive a Social Security death benefit if one partner were to pass away.

As an unmarried person with no children, your Social Security payments are returned to the government, even if you spent decades paying the Social Security tax. 

Ouch. 

Marriage penalty tax threshold begins at $731,201 for 2024

Based on the 2024 income tax brackets announced by the IRS, the marriage penalty tax begins when the combined household taxable income surpasses $731,200. After a married couple earns more than $731,200 and up to $1,218,700, they have to pay an additional 2% tax compared to when they were earning income separately.

Let’s give you an example. Assume you had a couple earn $1,218,700. Because they are filing jointly, they will pay an additional $9,750 in taxes. They have the same marginal tax rate (that’s the same % for each additional dollar). 

Given a top 1% household income is around $650,000 in America as of 2023, less than 1% of married households will pay the marriage penalty tax. Despite the rarity of paying a marriage penalty tax, it's still worth understanding how it happens. 

The nitty gritty of calculating the marriage penalty tax

For most of us, the income tax rate will be the same whether you’re filing separately or filing jointly if you’re below a $731,200 income (which is 99% of this country), meaning the tax question is at least a bit simpler. Because the income threshold for married files is double the single filers, there is equality in tax treatment between singles and married filers up until the $731,200 income.

Starting at the 35% marginal income tax bracket, the income threshold for married filers no longer doubles. If it did, the married filers income range would be $487,451 - $1,218,700, which is double the single filers income range of $243,726 - $609,350.

Instead, the IRS has determined $731,200 is the upper income limit for married filers to pay the 35% marginal tax rate. Every dollar earned after $731,200 as a married filer will face a 37% marginal income tax rate.

Only the government can explain in this land of equality why one plus one doesn't equal two. But by knowing what the government believes is fair, you can adjust your income and career aspirations accordingly. 

Now let's pretend two individuals equally earn $365,600. If these individuals get married, their combined household income is $731,200. They would pay the same amount of income tax as if they were still single. However, every dollar earned above $731,200 up to $1,218,700 would face an additional 2% marriage penalty tax.

$1,218,700 is calculated by doubling the top income threshold for singles ($609,350) in the 35% tax bracket. 

How to avoid the marriage penalty tax

You always have the ability to choose to file separately vs. jointly. You can even swap each year. But remember, your tax rate is the first piece of this decision.

Now that we’ve walked you through the pros and cons for the tax rate… the other piece to consider is whether you have better benefits for tax deductions or tax credits if you file separately or jointly.

There are countless possible marriage income permutations that can play out over time. Feel free to input your numbers and make some forecasts by visiting the marriage tax calculator at the Tax Policy Center. 

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