Is there still a marriage penalty?

On Behalf of | May 26, 2021 | Tax Law

Federal tax law changes made decades ago were supposed to eliminate the so-called “marriage penalty” for couples in Arkansas and around the country. However, there are still some aspects of tax law that give married couples harsher treatment than singles. Before a couple gets married or files their first tax return together, they should understand how their tax situation is affected by their status.

Some thresholds for tax rates are different for couples

The effects of marriage on taxes are more pronounced in higher income brackets. For example, a single pays a Medicare surtax at $200,000 of adjusted gross income, while a married couple pays the tax when their combined income tops $250,000. The same thresholds are in effect for the additional 3.9% surtax on investment profits. Married couples with an income over $1 million would pay more in taxes than if the couple filed separately or stayed single.

Couples filing as married can access extra deductions

In addition, a couple should consider whether it makes sense to file as married or separately. There are deductions that those filing as married can take advantage of that those filing separately cannot take. This includes things like student loan interest and the child care credit. The point is that your tax situation may change when you get married, and you should be aware of it ahead of time to plan financially. Some people end up shocked at tax time when they get hit with a bill that is much higher than expected.

Taxpayers who have issues with the IRS or need to plan for their tax future may benefit from the advice of an attorney. Tax law counsel could also help taxpayers address other arrangements that could minimize a couple’s tax burden.