How the "Marriage Penalty" Can Raise Your Tax Bill, Experts Warn

Marriage is often seen as a smart financial move.

Marrying for money isn't necessarily about finding a rich partner. Instead, many people see marriage as a smart financial move in general, according to a recent survey of 1,008 U.S. adults (both single and not single) that was commissioned by Forbes Advisor and conducted by market research company Prolific. Eighty-five percent of survey participants believe people are financially better off once they get married.

Judi Leahy, a senior wealth advisor at Citi Personal Wealth Management, told Forbes that there are several financial perks that come with being a couple. They can share the cost of insurance, split bills, and may also receive a bigger tax break since joint filers are eligible for more tax credits than single filers. But as it turns out, getting married can also potentially have a negative effect on your taxes.

Some married couples may be hit with a marriage tax penalty.

Don't automatically assume that getting married is going to be an advantage come tax time. After all, some married couples may face a marriage penalty when filing their returns, according to Olivier Wagner, founder of the tax firm 1040 Abroad. "This is a phenomenon in which married couples pay more in taxes than they would if they were single and filing separately," he tells Best Life.

The marriage penalty occurs when the income of two spouses are taxed at a higher rate than they would have been if the two had both been filing as single taxpayers, according to Wagner. And as Wayne Bechtol, a senior tax accountant from Austin, Texas, further explains, this can affect both higher and lower-income people. "Usually, all tax-bracket deductions are double the amount for married couples when they file their taxes jointly rather than individually," he says. "However, when the tax bracket thresholds, credits, and deductions are not double, they must pay the marriage penalty tax."

For more financial advice delivered straight to your inbox, sign up for our daily newsletter.

The penalty can be as high as 12 percent in some cases.

Not every married couple will face the marriage penalty. Some of the factors that can affect whether or not you'll have to pay it include your combined income and the number of children you have, according to Bill Ryze, a certified chartered financial consultant and board advisor at Fiona Finance. But when it comes down to how much you have to pay for the penalty, the main factor comes down to your income. The penalty can be as high as 12 percent or as low as 4 percent, depending on the couple's income, Ryze says.

"The penalty was introduced because the tax brackets don't double the income rates when married couples file jointly, especially for couples earning the same income," he explains. "When spouses have almost the same income level, they pay the marriage penalty, while a couple with only one spouse working does not incur the penalty. The number of children also affects the penalty because it plays a great role in determining the couple's filing status, deduction level, and access to credit."

This can affect both your federal and state taxes.

Despite the ability to affect both, the marriage penalty is currently more of a concern for states taxes than it is for federal taxes, according to Ryze. "Only couples with very high-income levels are likely to be subjected to federal marriage penalties," he explains. For 2022 tax returns, the top federal tax rate of 37 percent kicks in for single taxpayers whose taxable income is greater than $578,125. For married couples filing jointly, this rate kicks in at $693,750—which is less than twice that of unmarried filers.

"Simply put, many high-earning couples fall in the 37 percent tax bracket if they marry," Bechtol explains. "But if they remain single, it falls in the 35 percent tax bracket."

Some states also institute the marriage penalty at the state level. According to Bechtol, this currently impacts 15 states:

California, Georgia,  Maryland, Minnesota, New Mexico, New Jersey, New York, North Dakota, Ohio, Oklahoma, Rhode Island, South California, Vermont, Virginia, and Wisconsin. But seven states also allow married couples to "file individual returns and avoid paying the marriage tax penalty," he adds. This includes Arkansas, Delaware, Iowa, Mississippi, Missouri, Montana, and West Virginia.

Best Life offers the most up-to-date financial information from top experts and the latest news and research, but our content is not meant to be a substitute for professional guidance. When it comes to the money you're spending, saving, or investing, always consult your financial advisor directly.