- Days left

Marriage Penalty: Will Cupid's Arrow Stick You With a Higher Tax Bill?

×
Cupid taxesIt's hard to think of a less romantic topic than tax planning. But with Valentine's Day upon us, the Tax Policy Center wants you to take a brief break from flowers and chocolate to show you some of the financial consequences if you and your honey decide to tie the knot.

At the Tax Policy Center website, you can take the financial equivalent of a couples test to see whether you and your partner would be better off married or single -- at least from a tax perspective. All you have to do is enter your financial information, and the software takes care of all the calculations for you.

Marriage Penalty or Marriage Bonus?

In particular, the test is geared toward telling you whether you'll pay a marriage penalty or get a marriage bonus. Because married filers have different tax brackets than single filers, you can't assume that your tax liability after you marry will be the sum of the taxes from your individual returns. Some of the important factors involved include the following:
  • Couples where both spouses work are more likely to owe more in taxes than they would if they weren't married, because once you get above the 15 percent bracket, thresholds for higher tax rates on joint filers are less than double the rate thresholds for single filers.
  • Single-earner families, on the other hand, are more likely to get a marriage bonus, because the working spouse gets to take advantage of deductions and exemptions for the non-working spouse, and the family gets to enjoy lower tax rates on more overall income.
  • For high-income taxpayers, marriage can be especially costly because special provisions like exemption and deduction phaseouts and the Medicare surcharge tax start applying at levels that aren't much higher for couples than they are for singles. For instance, the Medicare surcharge applies to singles with incomes of more than $200,000 and couples earning $250,000.
Also, don't think you can beat the penalty by choosing the married-filing-separately option. Spouses who file separately get less favorable treatment than singles.

The Price of Love

Taxes certainly shouldn't be the main motivator for decisions about your romantic life, but it's still smart to know how marriage will affect your money. To learn more about the marriage penalty, check out this tax topic from the Tax Policy Center.

Motley Fool contributor Dan Caplinger was surprised to find he's paying a marriage penalty. You can follow him on Twitter @DanCaplinger.

For additional tax articles, visit the DailyFinance Tax Center


Increase your money and finance knowledge from home

How to Buy a Car

How to get the best deal and buy a car with confidence.

View Course »

Introduction to Preferred Shares

Learn the difference between preferred and common shares.

View Course »

TurboTax Articles

Deducting Mortgage Interest FAQs

If you're a homeowner, you probably qualify for a deduction on your home mortgage interest. The tax deduction also applies if you pay interest on a condominium, cooperative, mobile home, boat or recreational vehicle used as a residence.

What Extra Tax Deductions Should I Make Sure To Take?

The federal government offers tax deductions and credits to reduce taxable income under certain circumstances. There are several that are often overlooked, including deductions for job hunting, caregiver expenses for dependents and children while you work, a credit to reduce taxes for moderate- to low-income earners and the premium tax credit associated with the Affordable Care Act. TurboTax can help determine if you qualify for these credits and deductions.

Fatten Your Paycheck and Still Get a Tax Refund

If you usually get a tax refund, but would like to start putting more money in your pocket every month, we can help. Yes, you still have to fill out a W-4 form. But we've developed a quick and easy guide to assist you.

Add a Comment

*0 / 3000 Character Maximum

1 Comment

Filter by:
Ron

Dems don't like anything nornal! Gay marriage is fine but penalize NORMAL marriage!

February 14 2013 at 1:28 PM Report abuse +1 rate up rate down Reply