What newlyweds need to know about the ‘marriage penalty’

Q. I’m getting married soon. But I hear that when we file our taxes next year, we could end up paying a“marriage penalty.”What is that?

A. The “marriage penalty” can happen when married couples pay more in taxes than if they remained single.

For instance, one way a marriage penalty can be triggered is when, for any given tax rate, the minimum taxable income for the joint filers’ tax bracket is less than twice the minimum amount for the single filers’ bracket. (This type of marriage penalty is also more likely to occur if each spouse earns about the same amount each year.)

Before the 2017 tax reform law, this was a fairly common occurrence for higher-income couples. Now, however, only the top tax bracket (37% rate) contains this type of marriage penalty trap.

As a result, only couples with a combined taxable income over $647,850 are at risk of suffering a penalty when filing their 2022 federal tax return.

Unfortunately, though, the

2017 law is set to expire after

2025. So, unless Congress extends the current tax rate structure, more families will be hit with a marriage penalty beginning with the 2026 tax year.

Marriage penalties can also be triggered by other provisions in the tax code containing a threshold or other dollar amount applicable to joint filers that is less than twice the amount applicable to single filers.

For example, the threshold for the highest capital gains tax rate for joint filers ($517,200) is less than twice the threshold amount for single filers ($459,750), which creates a marriage penalty for some couples. Elderly married couples face their own type of marriage penalties. For 2022, the additional standard deduction for two married people who are at least 65 years old is $2,800. However, two single 65-yearolds can each claim a $1,750 extra standard deduction, which adds up to $3,500 in total. The cut-off amounts for determining how much of your Social Security benefits are taxed can also create marriage penalties for seniors. That’s because the various thresholds for joint filers are less than twice the amount for single people.

The $10,000 limit on the deduction for state and local taxes (a.k.a., the SALT deduction cap) penalizes married couples, too. Once you’re married, you can’t deduct more than $10,000 in state and local taxes (the limit is $5,000 for married people filing a separate return). However, both you and your loved one would each be able to deduct up to $10,000 — for a total of

$20,000 — if you weren’t married.

ANDREBLAIS/DREAMSTIME