Love and Taxes – The Marriage Penalty and Marriage Bonus

By on February 19, 2013

Getting hitched is just the beginning of a new stage in fiscal responsibility. For some couples, marriage can be a tax burden and costing you more. While the financial situation of other couples might allow them to reap tax advantages from marriage. How are newlyweds supposed to know what to file? There are bound to be some bumps in the road to joint finances, but don’t fret, if you weigh your options ahead of time you just might smooth off a little of that tax bill.

Once you’re married, you have a choice of filing your income taxes separately or jointly. Most couples opt for filing jointly, however, depending on your circumstances a change in filing status might boost your tax return. Filing jointly tends to be advantageous when one person earns significantly more than the other and the combined income does not warrant a bump into the next tax bracket, plus, it is much less complicated to claim tax credits available to married couples on separate forms. And sometimes filing separately pays off if one spouse has itemized deductions, high medical bills, or some serious tax problems.

Marriage Penalties and Bonuses

Before 2001, marriage was penalized by the Internal Revenue Service with a standard deduction which is widely viewed as unfair. Not only did combined incomes often raise a couple’s tax liability into the next tax brackets, but the combined standard deduction was less than their individual standard deductions. With the passing of the Economic Growth and Tax Relief Reconciliation Act (also referred to as the Bush Tax Cuts) of 2001, the IRS turned the tables and offered couples their full share of the standard deduction plus credits.

For single taxpayers, the standard deduction is $5,950 and now, for low to mid-level wage earners who are married filing jointly, the standard deduction is exactly twice that amount – $11,900. Add in exemptions for dependents and personal tax credits, joint filers can save upwards of $3,800 and more – which does not account for discounts and credits for children. Taxpayers can now claim a considerable marriage bonus.

Despite this new level playing field, married couples still risk paying more if each earns enough to raise their combined income to a higher tax rate which, even with exemptions and itemized deductions may increase their overall tax bill. In some cases, it is best to file married-separate: to avoid high tax liabilities, if one spouse has a large number of medical bills which meets the deductions threshold of their individual income, or to itemize deductions on one spouse’s tax return while the other can claim more with a standard deduction.

Have sit down with your trusted tax planner and weigh all of your options before choosing a filing status which fits your financial situation.  With smart planning you can avoid marriage penalties and cash in on available marriage bonuses.

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About Terri A. Kamoto

Senior writer for FSN - Terri is a former financial analyst dedicated to making personal finances, budgeting, investment and insurance advice accessible, up to date and easy to understand. It is hard to find professional advice written in a language someone without a financial background can understand. Terri helps companies synthesize industry lingo and expertise into clear and informative content which builds smarter, financially successful individuals. You can find Terri on !

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