The term “marriage penalty” in taxes refers to the situation that two people with the same income would pay more tax if they married and filed a joint return (MFJ) than if they stay single and file separately as single taxpayers.
In order to avoid a marriage penalty, the tax bracket income thresholds for married couples must be exactly double those for single taxpayers. With the tax bracket reorganization, taxpayers with a taxable income of $0 to $200,000 for filing single and $0 to $400,000 for MFJ pay the same percentage of tax at each level as you can see in the tables below.
Brackets* – Single TCJA (2018-2025)
$0 – 9,525 10%
$9,525 – 38,700 12%
$38,700 – 82,500 22%
$82,500 – 157,500 24%
$157,500 – 200,000 32%
$200,000 – 500,000 35%
$500,000** and up 37%
Brackets* – Married Filing Separately TCJA (2018-2025)
$0 – 9,525 10%
$9,525 – 38,700 12%
$38,700 – 82,500 22%
$82,500 – 157,500 24%
$157,500 – 200,000 32%
$200,000 – 300,000 35%
$300,000** and up 37%
Brackets* – Married Filing Jointly / SS TCJA (2018-2025)
$0 – 19,050 10%
$19,050 – 77,400 12%
$77,400 – 165,000 22%
$165,000 – 315,000 24%
$315,000 – 400,000 32%
$400,000 – 600,000 35%
$600,000** and up 37%
Under the TCJA, if a couple is married filing jointly and has the following attributes there is a very low chance of any marriage penalty:
- Neither partner can claim children as dependents.
- Neither partner qualifies for the Earned Income Tax Credit.
- Neither partner qualifies for food stamps or any other welfare program.
- The combined income does not exceed $600,000.
Single filers receive an extra $200,000 each at the lower 35% rate while married couples filing jointly must pay tax at a 2% higher rate (37%) for the first combined $400,000 they make over $600,000 in taxable income. This is a maximum $8,000 marriage penalty, increasing income taxes for married couples by up to 2.59%.
The IRS published that the reason the marriage penalty was imposed at the top tax rate was to help raise more revenue and enable Congress to fund other tax reductions in the TCJA.
For married taxpayers, it makes sense every year to calculate tax liability both ways: MFS and MFJ to see what’s optimum for the couple.
