Message Font: Serif | Sans-Serif
No. of Recommendations: 0
[[I wish! My boyfriend and I have been contemplating marriage, but after hearing about this, I think
we'll live in sin for a bit longer until Congress passes legislation on this... But here's what I found out
about the marriage penalty from Motley Fool's Q&As:]]

Here is some additional information, including examples, about the marriage penalty.

The penalty applies whenever both spouses work and they have to pay at a higher tax rate on the same total income than they would pay if each were single. This usually happens where both spouses have relatively equal incomes.

For example, say that two taxpayers each earned (had taxable income of) $25,350 in 1998 (and assume double that or taxable income of $50,700 on a joint return):

If married, their joint return
tax would be $8,690.50
If single, each would owe
$3,802.50, a total of $7,605.00
--------- The marriage penalty is $1,085.50

The marrieds pay $1,085.50 more because they pay at a 28% rate on part of their income, while the singles both pay at a top rate of only 15%. At the high end, if each spouse had taxable income of, say, $278,450 (total of $556,900), the couple would pay $16,737.20 more tax than if each were single.

There are still more marriage penalties. The additional penalties don't apply to everyone, or in every year, but they still mean more tax when they do hit. Here's a list of some of the more common ones:

Quicker loss of itemized deductions: A married couple starts to lose their itemized deductions when their total combined adjusted gross income for 1998 exceeds $124,500. If single, each could earn $124,500 (total of $249,000) before losing any itemized deductions.

Smaller standard deduction: A married couple's standard deduction in 1998 is $7,100. If single, each would get a standard deduction of $4,250 (total of $8,500).

Quicker loss of personal exemptions: A married couple starts to lose their personal exemptions at combined adjusted gross income of $186,800. If single, each could have adjusted gross income of $124,500 (total of $249,000).

Lower capital loss deduction: A married couple can deduct capital losses up to $3,000 total. The same two persons, if single, could deduct a total of $6,000 ($3,000 each).

Reduced passive activity loss deduction for active rental real estate owner: A married couple who actively participate in renting out real property can deduct up to $25,000 of loss from the activity, if their modified adjusted gross income is $100,000 or less. If single, each would get an up to $25,000 deduction (up to $50,000 total) and each could earn $100,000 ($200,000 total).

On the other hand, tax can be somewhat lower for some marrieds filing jointly than if they were single, where there's a wide discrepancy in their earnings. There's no universal rule.

TMF Taxes
Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.