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No Chance for A Romantic Dinner in Your Favorite Restaurant on Valentine’s Day? Try TPC’s Marriage Calculator Instead
Depressed that you won’t be dining out in a romantic restaurant with your loved one this Valentine’s Day? The Tax Policy Center has a prescription for the pandemic blues. Spend time with TPC’s updated Marriage Calculator for tax year 2021.
Here’s what you’ll learn: Depending on your circumstances, marriage may cause your tax bill to go down (a marriage bonus) or go up (a marriage penalty). Or wedded bliss may have no impact at all (on your taxes, that is).
When will marriage reduce your income tax bill?
Couples with significantly different incomes usually receive marriage bonuses. When they marry and file income tax returns jointly, more of the couple’s combined earnings will fall into a lower tax bracket than if they each filed their own tax return as a single taxpayer.
- Brett is an artist who has never sold a painting and has zero income. Beth is an accountant who earns $100,000. If they don’t marry, Beth’s income tax bill would be about $15,000 while Brett would owe no income taxes. But as a married couple, Beth and Brett would pay $8,590—a saving of about $6,400 thanks to filing jointly.
When will marriage increase your income tax bill?
Marriage penalties generally occur when various tax provisions--exclusions, deductions, credits, and tax brackets—for married couples aren’t twice the comparable amounts for single filers. Typically, partners with similar incomes are most prone to those penalties. Couples throughout the income distribution can experience marriage penalties, though their circumstances may be very different. Here are some simplified examples:
- Penny and Peter, a DC power couple without kids, each earn $350,000. If they don’t itemize deductions in 2021, they would pay $932 more in taxes if they marry than stay single. Why? Because the highest income tax rate of 37 percent kicks in for married couples at $628,300 of taxable income—which is a lot less than twice the $523,600 threshold for single filers.
- Priscilla and Preston, another childless couple, each make $100,000. Each pays $8,000 in state taxes and contributes $10,000 to charity—making it worthwhile to itemize. But if they marry and file a joint return, their tax bill would be $1,321 higher than if they remain single. Marriage would increase their tax bill because the itemized deduction for state and local taxes is capped at $10,000—regardless of marital status.
- Patricia and Patrick each make $30,000, and they have a toddler, Phoebe. If they don’t marry, Patricia would claim Phoebe as her dependent and file as a head of household, which would increase her standard deduction to $18,800 and keep her in a lower tax bracket than if she—like Patrick—filed as single, with a standard deduction of $12,550. Further, she could claim the earned income tax credit (EITC) as well as the child tax credit, resulting in a tax refund of $2,823. As a single filer without children, Patrick would owe $1,895 in income taxes. So, on net, the couple would receive $928 from the government. But if they marry, Patricia and Patrick would pay $1,790 in income taxes because Patricia would lose the ability to file as head-of-household and their combined income would be too high for the EITC.
When does marriage have no impact on your income tax bill?
If you and your spouse earn about the same amount of income, don’t itemize deductions, and don’t have kids, there’s a good chance that marriage will not change your combined tax bill. Except for very high-income taxpayers, the tax brackets for married couples filing jointly are twice as wide as those for single filers. And the standard deduction for married couples is twice that for single filers.
- Consider Nick and Nathan, a childless couple, who each earn $50,000. Unmarried, each would pay $4,295 in income taxes—a total of $8,590. Married and filing jointly, their income tax bill would not change—and would be the same amount as Brett and Beth, the couple with significantly different incomes, pay filing jointly.
To see how marriage works for you (tax-wise, at least), try out our calculator. You can create as many examples as you’d like. It will ask you a few quick questions about the number of children, income from various sources, and deductions (for those who choose to itemize). Hit “Calculate Tax Now,” and you’ll learn how much marriage bonus or penalty you would get. Want to get into the weeds? Simply click the “See Detailed Breakdown” button, and you can trace the sources of your bonus or penalty.
If you are lucky enough to receive a marriage bonus, celebrate! If not, just remember “when one loves, one does not calculate.” Happy Valentine’s Day!
Posts and comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.