The IRS Marriage Penalty

When two people get married, it impacts every aspect of their lives.  This includes taxes and their tax filing status.  Filing married, even separately, may result in a very different tax liability than filing as a single person.  Your choice of filing status can cost you money.

Different Brackets

The tax brackets for married and single people are markedly different.  It is not uncommon for couples to wind up paying less in taxes than they might have if they were both single. Not all couples pay less – many wind up paying more.  It depends primarily on total income and how much it deviates from the average.  The steepest penalties tend to fall on married couples who are either very poor or very rich – couples with average income tend to pay less taxes.

A 2015 study analyzed the amounts paid in and out by hypothetical couples of varying incomes, and found that the highest marriage penalty resulted among couples who both made around $17,000.  It also found that African-American couples tended to be more disproportionately hit by the penalty.

Factors To Keep In Mind

While a slightly higher tax burden is obviously not a reason to reconsider a marriage, it is something to consider, especially when dealing with questions like asset disposition. Many couples, for example, opt to execute a prenuptial agreement before their marriage that disposes of assets and debts in the event of divorce or one spouse predeceasing the other.  However, it is rare that they consider tax issues before marriage.

It is also important to remember that if you have children, the dependency exemption affects your taxes either positively or negatively.  Single people with children are sometimes able to file as head of household and claim the children as dependents, which can sometimes result in a lower tax burden than it would for a married person.  As a result, the marriage penalty is very often greater for couples with children than it is for unmarried couples with children.

There have been some small attempts at improving the tax code so as to minimize the marriage penalty – after all, people should not be penalized for choosing to spend their lives together – but most have been aimed only at those making over $100,000 total, and have only really helped people in that bracket. Until the tax code is revamped, the best way to avoid a penalty is to analyze your taxes with a qualified professional.  Either way, it should not keep you from marrying – just be prepared.

Seek Experienced Assistance

It is generally a good idea to know what your tax obligations are before making a major life change, like marriage.  If you have questions, the Orlando family law lawyers at the firm of Goodblatt · Leo are happy to help answer them.  Contact our offices today at 407-228-7007 to request an appointment.