Marriage Penalty vs. Marriage Incentive

When the Marriage Penalty Becomes the Marriage Incentive

by Jeffrey A. Jackson, CPA/PFS, CFP

For many taxpayers, Tax Reform turned the Marriage Penalty into the Marriage Incentive. For anyone who may wonder if it better to get married this year or next…or for that matter, to get unmarried this year or next, it’s time to talk with your CPA. There are some truly surprising results thanks to tax reform.

The Marriage Penalty

Just what is the “marriage penalty”?

For our purposes, it has nothing to do with who leaves dirty dishes in the sink or who hogs the TV remote. Instead we are referring to the additional tax that a two-income married couple often pays when compared with the tax they would owe if each were filing as a single person.

Consider Brenda and Bill. They were thinking about getting married in 2017 but decided to delay until 2018 when they learned that their taxes would increase by over $2,500 if they filed a joint return when compared with their combined single status taxes. In this case, Brenda made $500,000 and Bill made $60,000.

This increase in tax is the marriage penalty. You might not think a $2,500 penalty is enough to cause you to put off marriage. But what if the penalty was $16,800? That is exactly the amount of the penalty if Brenda and Bill each made $280,000 in 2017. Would $16,800 cause you to delay marriage from December to January (or longer)?

The New Marriage Incentive

Now consider Brenda and Bill’s marriage penalty under the 2018 tax structure. There is no tax penalty if they each earned $280,000…none at all. And, if Brenda made $500,000 and Bill made $60,000, there is a marriage incentive as the joint tax on their combined income is over $14,000 LESS than their combined tax if they file as singles.

What if Brenda’s income were from a partnership? The analysis becomes even more interesting thanks to the new Section 199A deduction for those with pass-through income. For this analysis, assume that Brenda is physician and she makes $250,000 from her partnership. Bill’s income is from a W-2 and he makes $50,000.

When Brenda files as a single, her income is too high to claim the Section 199A deduction, but when she marries Bill, their combined income is less than the phase-out threshold for married couples and they can claim a $50,000 deduction under Section 199A. The Marriage incentive? $18,552 on combined income of $300,000.


Many factors affect your tax calculation. There is no one factor that you can consider when estimating whether taxes increase or decrease as the result of marriage. Certainly not everyone is likely to save taxes by marrying. Besides new standard deductions, tax rates schedules and the Section 199A deduction, we need to consider things like the child tax credit for those couples who already have children. Higher credit amounts and much higher phase-outs mean that more two-income couples will still be able to claim the child tax credit even after they are married.

If you are considering marriage but haven’t yet set the date, or if you are trying to decide whether to finalize a divorce before or after the end of the year, now more than ever you need to talk with your Brady Ware tax advisor.

Marriage Penalty or Marriage Incentive is truly fact sensitive. And we are seeing surprisingly different total tax burdens based on Married, Single, or Head of Household filing status assumptions.

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