History

• In 2008, legislation was passed that significantly reduced the marriage penalty for most couples. Thus, marriage penalty tax calculators from 2007 and earlier are no longer accurate.
  
  

Significance

• The marriage penalty is the term used to describe the difference in the amount of taxes paid by a married couple versus what they would have paid if they had remained single. For some couples, this difference results in higher taxes; for others, the resultant tax liability is lower.
  
  

Misconceptions

• While the marriage penalty used to stem from many inequities in the U.S. tax code, a great many of those were eliminated by legislation. The two lowest tax brackets for "married filing jointly" are exactly double that of the same tax brackets for those filing "individually," which results in no penalty at all for those brackets. Additionally, the standard tax deduction for married filing joint is exactly double the standard deduction for single filers.
  
  

Function

• Because the marriage penalty no longer stems from simple imbalances in the standard deduction and all tax brackets, the only realistic way to calculate it is to use a standard tax calculator and compare the results by running it three times. After running the tax calculator once as married filing jointly and once for each person as a single filer, add the results from the two single calculations and compare them to the results from the joint calculation.
  
  

Considerations

• The amount paid via annual taxes is not the whole story. Differences in the taxable nature of capital gains, home sales and other large tax events can significantly change the total amount of taxes a couple pays over multiple years.