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Tax Blog

Am I Subject to a Marriage Bonus or Marriage Penalty Under the TJCA?

An intended consequence of the TCJA is that the combined tax liability of a married couple may be higher or lower than the combined tax burden if they had remained single. If their burden is lower, it is considered a marriage bonus. However, if their burden is greater than before, it is considered a marriage penalty.

Many variables can go into whether how a marriage will affect someone’s tax burden such as combined income, whether or not the incomes are similar, or the number of dependents claimed each year. For example, an unmarried couple earns a total of $60,000 with $20,000 from the first spouse and $40,000 from their partner. As an unmarried couple their tax bill would be roughly $8,560 under the TCJA. However, should the couple choose to marry, their tax bracket would wider than that of an unmarried couple. As a result, less of the couples’ income is taxed at the 12% marginal tax rate than a married couple and their combined tax burden would fall approximately $31.

Conversely, a marriage penalty is often only felt at very high income levels. For example, an unmarried couple with an income of $1,000,000 combined would have a total tax bill of roughly $328,837.80. However, if they were to get married their burden would go up approximately $890.60 for a couple of reasons. First, the narrower top tax brackets for married individuals push more of their taxable income into the 37 percent marginal tax bracket. In addition, their combined income as a married couple would push their income to be more greatly affected by the Medicare Surtax of 0.9 percent on income over $250,000.

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