Call me old fashioned, but I love being married. When I met my future wife, we fell in love and we were married. I had a Masters Degree in Tax and helped many clients minimize their taxes. I knew exactly what our marriage would cost me in income. We were married despite the Marriage Tax Penalty. We are still in love and I love being married. We continue to endure the Marriage Tax Penalty.
Why does our Tax Code penalize married people?
In 1990 55% of US households were married, in 2000 51% and in 2010 it is 49%.
The marriage penalty came from the Tax Reform Act of 1969. At the time most families had one income earner and it was designed to help those families. It was even referred to as the marriage bonus tax as a single earner with a family paid less tax than an earner without a family. In 1960 72% of all people were married. Today most households have two income earners but only 52% of US people are married. This is why we use the phrase marriage penalty tax. Does this tax keep people from getting married? I hope not; but it does increase two income married couples’ tax liability and reduces their usable deductions.
Today the 2012 American Taxpayer Relief Act (ATRA) actually increases the marriage penalty for higher married dual income couples. If you are in a 25% tax bracket you are defined as higher income.
So far I have offered you statistics. How will the marriage penalty and the ATRA affect you in your 2013 taxes? If you are two married income earners with combined incomes under $200,000 your taxes will increase, but your marriage penalty will be the same as 2013..
The income group most affected by the marriage penalty have a combined gross income over $400,000. On average high earners will pay an extra $9,000/year more in taxes than their unmarried peers.
If you are in the Marriage Penalty Tax income group, think of it as the cost of a luxury car payment and enjoy the ride.