At What Income Level Does The Marriage Penalty Tax Kick In?

marriage penalty tax

One of the most disappointing things about the government is their institution of the marriage penalty tax. The government is smart to laud the act of marriage in order to collect more taxes. When you're in love, what's an extra $1,000 or $10,000 a year in taxes you've got to pay? Love is blind and the government tries to take full advantage of you.

Lucky for us, we are not blind. We don't mindlessly follow everything our politicians have to say.

For example, we question why the government suddenly allowed Roth IRA conversions during the height of the financial crisis. Could it be because the government desperately wanted our tax dollars due to budget overruns? Of course!

We think for ourselves, and that's why the lot of us are going to be much better off than the rest.

Marriage Penalty Tax Income Threshold 2024

For 2024, the marriage penalty tax kicks in starting at $731,201. In other words, if a married couple were single and making over a combined $731,201, it would be better if the couple stay single to save on taxes.

Below are the 2024 federal marginal income tax brackets.

Notice how income thresholds are double until you get to the 35% tax bracket. Instead of doubling $609,350 for singles to $1,218,700, the income threshold only goes up to $731,200 until you have to pay the 37% tax bracket.

The marriage penalty tax is a 2% greater tax on all income between $731,200 to $1,218,700. At the maximum income of $1,218,700, that's an extra $9,750 in taxes you have to pay.

2024 Income tax brackets

Marriage Penalty Tax Examples With Various Income Combinations

This post will present examples of various fictitious couples with various income levels and deductions to give you an idea of how much extra you must pay the government in order to get married. All data comes from this marriage penalty tax calculator by the Tax Policy Center. You will understand when the marriage penalty tax kicks in by income.

I encourage you to input your own numbers and see what happens after this post as well. Remember, please take your anger out on the government, not on me.

I'm just the investigator trying to shine a bright light on this ludicrous situation. Just the fact that I had to spend loads of time figuring out various income permutations to see when the marriage penalty tax kicks in is maddening. 

Marriage Penalty Tax Example #1A

Here are some various marriage penalty tax permutations for several years ago. For 2024, you can add about 20% to each of the income levels to account for inflation and an increase in income thresholds.

In this example, each person makes $50,000, no children, no mortgage, no marriage penalty tax. Hooray!

Marriage Penalty Tax

Marriage Penalty Tax Example #1B

Same example of $50,000 income each, mortgage, but with two children. It shows a marriage penalty, but the overall tax amount is lower due to child tax credits. From $11,638 to $7,863. So far so good. There is hope for humanity, but the government is saying you should have children as singles instead. 

Marriage Penalty Tax With Children

Marriage Penalty Tax Example #2

One person makes $100,000 and has a mortgage, another person earns $50,000. They have no children but it doesn't matter even if they did because they are past the $110,000 combined income threshold to receive full child tax credits. A $1,050 marriage penalty is created with their union. Not egregious, but not ideal.


Marriage Penalty Tax Example #3

Each person makes $200,000. They don't own a home, and have two children. The results are the same if they have no children. A whopping $15,162 marriage penalty tax is created for these two high income earners.


Marriage Penalty Tax Example #4

Each person makes $200,000, but this time they have $45,000 in deductions from a mortgage and property taxes. They have two children under the age of 17. The deductions drop their total tax bill down to $92,089 from $104,987 in the previous example, but if they weren't married, their combined taxes would only be $76,825 (17% lower).


Marriage Penalty Tax Example #5

One person makes $500,000, the other person makes $80,000. They own a home with a mortgage and have one child. Lucky for the person making $80,000 to marry the person making $500,000. Not so lucky financially for the $500,000 income earner. After 20 years, this person will have paid $270,000 more in taxes than if he had stayed single or not married with the added $13,434 in taxes a year.


Marriage Penalty Tax Example #6

Two people make $85,000 each and have no kids and no mortgage. It looks like $170,000 in total income is where the marriage income tax starts to kick in.

Marriage Penalty Tax Equal Incomes Table

Marriage Tax Credit Example #7

One person makes $60,000, the other person makes $40,000. There is no mortgage and zero kids. We have a winner! Because the combined income is under $110,000, the couple can decide to have a kid and claim $1,000 per child to lower their taxes even further to $10,638 from $11,638.


Marriage Tax Credit Example #8

One person makes $50,000 and marries someone making nothing. They do not have a mortgage or kids. If they were to have kids, their $3,548 tax liability would decline by $1,000 per kid. If they decide to have three kids, not only will they not have to pay any taxes, they'll “earn” about $700 bucks from the government every year. This is a fantastic income combination.

Marriage Penalty Tax Gain

Marriage Tax Credit Example #9

Here is the beautiful scenario where one person makes $200,000 and one person makes $0. They have a couple kids (doesn't matter), mortgage interest of $18,000, pay state taxes of $12,000, and charitable contributions of $1,000.  Why HELLO $7,330 tax credit!

Marriage Penalty Tax Credit

Marriage Tax Credit Example #10

Here is the real home-dinger. One person makes $300,000 and marries another who makes $0. They pay $35,000 in State taxes, $25,000 in mortgage interest, $2,000 in charity and have a child. The $300,000 a year earner saves $11,162 a year in taxes. I tried higher than $300,000 a year and the marriage tax credit starts to decline.

Marriage Tax Credit Huge


Based on my analysis, the ideal income variations to avoid paying the marriage penalty tax are:

1) Have a total income (MAGI) below $110,000 to be able to claim $1,000 per child tax credit. You still get some child credit after $110,000, but there is a drastic phaseout. Depending on deduction levels, owning a home with a mortgage will reduce your tax bill further. It seems that a total income level hovering around $100,000 enables couples not to pay a marriage penalty tax and potentially even get a marriage tax credit.

2) One person with a MAGI $300,000 or below marries someone with $0 income. Example #8 ($50,000 + $0) is a common example that helps many middle class Americans. Then example #8 shows how you can pay no taxes and actually earn money with kids. Example #9 ($200,000 + $0) and #10 ($300,000 + $0)  are also a fantastic scenario that can help those living in high cost areas. After $300,000, the marriage tax credit starts to decline.

3) Don't have a combined income of more than $170,000 (Example 7 with $26 penalty) if two people are working, although at $150,000 total income (Example #2 has a $1,050 penalty)! Baffling. Best to just keep total income below $110,000 or have one spouse not work with total income at $300,000 or below.

Worst Income Combination That Pays The Most In Marriage Penalty Tax

The worst scenarios are when you have one high income earner marrying a low income earner or two high income earners getting married. The reason is because 1 + 1 = 1.25 or less e.g. $406,750 + $406,750 = $457,600 for the 39.6% marginal tax bracket for example. The government assumes one person in the marriage will downshift or quit their jobs. How sexist is that?

Meanwhile, in the case of a low income earner marrying a high income earner, the low income earner's income will just get taxed at the highest marginal tax rate. For example, say you make $30,000 and marry someone making $800,000. Your $30,000 is no longer taxed at the 15% rate because it is added on to your partner's $800,000 income to be taxed at the 39.6% rate.

2017 Marginal Federal Income Tax Rates

Still Want To Get Married If You're Rich?

With the passage of new tax reform under President Trump, the marriage penalty tax is now practically abolished in 2018 and beyond.

Based on the 2024 federal income tax brackets, there is tax EQUALITY up until $365,600 in taxable income per person. In other words, two individuals who make $365,600 in taxable income and get married for a combined income of $731,200 will pay roughly the same amount of tax as if they were single.

Single filers who earn between $243,725 – $609,350 pay a 35% federal marginal income tax rate. However, married filers that earn between $487,450 – $731,200 also pay a 35% rate.

If there wasn't a marriage penalty tax, the income range for married filers at the 35% rate would be $487,450 – $1,218,700, or exactly double the single filers income range threshold. But it is not!

So if you are fortunate enough to make over $731,200 as two single individuals, you may want to continue staying single.

Benefit Of Legally Getting Married

It used to be the only financial reason to get married is to prevent the government from stealing from you if you die before you start collecting Social Security. Isn't it absurd that if you die early, your Social Security benefits go back to the government and not to a designated family member?

By legally marrying someone, your surviving spouse gets to at least collect your Social Security benefits when the time comes for distribution.

Yes, there is something to be said for following tradition and being a romantic. I'm sure some reading this will think, “Gawd, love is not just about money you know!”, which is true. Now finally, we can all marry and not have to pay the government for such a privilege!

Achieve Financial Freedom Through Real Estate

If you want to pay less taxes and make more money, one way is by investing in real estate. Rental property owners get to deduct non-cash amortization expense each year that lower their taxable income.

Real estate is my favorite way to achieving financial freedom because it is a tangible asset that is less volatile, provides utility, and generates income. By the time I was 30, I had bought two properties in San Francisco and one property in Lake Tahoe. These properties now generate a significant amount of mostly passive income.

In 2016, I started diversifying into heartland real estate to take advantage of lower valuations and higher cap rates. I did so by investing $954,000 with real estate crowdfunding platforms. With interest rates down, the value of cash flow is up. Further, the pandemic has made working from home more common.

Here are the two main private real estate platforms:

Fundrise: A way for all investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and now manages over $3.3 billion for over 400,000 investors. The company primarily invests in residential and industrial real estate in the Sunbelt region, where valuations are lower and yields are higher.

CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations, higher rental yields, and potentially higher growth due to job growth and demographic trends. If you have a lot more capital, you can build you own diversified real estate portfolio. 

Invest In Private Growth Companies

Finally, consider diversifying into private growth companies through an open venture capital fund. Companies are staying private for longer, as a result, more gains are accruing to private company investors. Finding the next Google or Apple before going public can be a life-changing investment. 

Check out the Innovation Fund, which invests in the following five sectors:

  • Artificial Intelligence & Machine Learning
  • Modern Data Infrastructure
  • Development Operations (DevOps)
  • Financial Technology (FinTech)
  • Real Estate & Property Technology (PropTech)

Roughly 35% of the Innovation Fund is invested in artificial intelligence, which I'm extremely bullish about. In 20 years, I don't want my kids wondering why I didn't invest in AI or work in AI!

The investment minimum is also only $10. Most venture capital funds have a $250,000+ minimum. You can see what the Innovation Fund is holding before deciding to invest and how much. Traditional venture capital funds require capital commitment first and then hope the general partners will find great investments.

The Average Net Worth For The Above Average Married Couple

Financial DEpendence Is The Worst: Why Every Spouse Should Have Their Own Bank Account

154 thoughts on “At What Income Level Does The Marriage Penalty Tax Kick In?”

  1. You deliberately biased this entire analysis. Where are the tax rates for Married filing Separately? There is no penalty in that case, but that would undermine your whole piece, wouldn’t it. Can’t have that! You have a bone to pick and facts be damned! And you want people to pay you for advice?

    1. Financial Samurai

      Why so angry? Shouldn’t you be happy 99% of couples getting married no longer have to pay the marriage penalty tax?

      Where am I asking people to pay me for advice? Everything you read on Financial Samurai is free.

      If you are having a difficult time with taxes or with your marriage, please focus on fixing the root of the problem.

  2. Im still very conused and i dont see an example from the little amount i and fiance make… i make 24,000 and he makes 10,000. We have 2 kids… i really want to get married but i cant afford a penalty, we already dont make enough…are we safe?… taxes are so confusing to me… :'(

    1. Evelyn – Being that both you and your partner do not have high income, you would *not* experience the marriage penalty. In fact, marriage (and the fact you have kids) would provide you with some benefits at yearly tax time. The marriage penalty typically kicks in when both partners are high-income earners (think around $100K/year and more each incomes). When they marry, their income bracket jumps up even more, usually costing them several thousand in taxes at tax time. Typically, the marriage penalty would also *not* kick in if one spouse was a high-income earner but the other earned low or no income. But for you, you definitely would not take a hit in marriage with your current financial income. On a side note, is that accurate that you both only make a combined income per year of $34,000? Where in the US do you live on that kind of income?

      1. Thanks for posting this reply. Me and my partner have almost the identical income as Evelyn’s family and I found your post very helpful. I make around $10-13k a year (12 years in same profession), my boyfriend makes $24k (bachelors degree). We have one child. You asked Evelyn where do you get by on that kind of income? Well, if it’s helpful we live in a college town in the SE. We rent a 2 bedroom apartment downtown ($725 a month), own 1 car, walk or bike to work. We too want to get married but have been worried about a lower tax return, as that has been our safely net.

        1. Never replied in triplicate. Seems like the govrnment will pay you or at least make it so you all will have no tax once you reach 5 person house so go for it

  3. This is so helpful! But check your info about there not being a marriage penalty under the new tax plan. My husband and I got a $6k penalty. We have a situation where I am the higher earner and own property. He makes 1/3 my income and would normally benefit from the standard deduction. Once married he couldn’t use the standard deduction and my deductions essentially had to be applied to both our incomes. Major bummer.

    1. I think overall, it wil significantly reduce the marriage penalty for most (unless you’re in the top bracket). If you’re in a high tax state, you’re capped at 10k for SALT for married couples but if you are two single, you can both claim 20k for SALT. I don’t think this will affect many couples but is somethign to consdier. Otherwise, the new plan essentially eliminates the penalty.

  4. Kathryn Polster

    Wow. I’m happily married, but I wonder if we should get a divorce. $125,000 joint income, no kids, no property. Just some student loan interest to write off. We don’t WANT to own a home nor have children. We just want to figure out how to keep more of our money. This stuff is all so overwhelming. Thanks for laying it out. It is a little easier for me to understand.

  5. Great read! I’ve been fidling with this concept and that same calculator you used for quite some time now. We aren’t religious or care for traditions much but my GF is your typical girly girl believing in whatever romantic fantasy/rite of passage comes with marriage. After sitting her down and telling her we’d likely owe ~5k more in taxes a year and this number will only go up as we continue to work, she quickly saw the light. We also live in NYC, which is probably the worst place in the country as far as taxes and cost of living go and there’s zero chance that either of us are capable of supporting the other.

    We ran the calculator a few times and with our 35k of mortgage interest and property taxes (I made 160 and gf made 100), we get around 3k of tax penalty. But if you look closely at the tax brackets, the penalty really kicks in hard after a combined MAGI of $230k because that is where married filing jointly goes from 28% to 33%.

    We then ran another scenario where I made 175k and she made 150k (combined of 325k) and the tax penalty more than doubled to 6k! And then we added scenarios where we had kids and another property, rental income etc. and we easily surpassed 10k. Safe to say, we know what must be done now.

    Nevertheless, we will still have a wedding, rings, and all the other nonsense because well? We can and it’s a good party. However, we will NOT go to the courtroom to sign that piece of paper stating we’re “legally” married. Because, why must I have the government tell me we are committed to each other? That little piece of paper could cost of up to half milion dollars by the time we’re done working! And even if we were religious, I’m not sure why that piece of paper is so important because the ceremony is at a church, administered by a priest no? Not some paper pusher at the local courtroom.

    1. Hi Johnny!
      My BF and I are in the same boat as you. However, it can sometimes be tricky to find an officiant that will “announce you husband and wife” if they don’t see the legal paperwork….it’s something about it could jeopardize their job/title. This doesn’t mean you can’t find one, but it might be tricky to find one on board with you plan.

      Another idea though is a symbolic wedding! Mexico does these where it’s the whole wedding without the legal part. You can do it legally in MX as well, but that requires bloodwork and who wants to give blood to the MX government?? So look into a Mexican symbolic wedding. I think some other Caribbean countries do it too, but MX seems to be the easiest.

      1. I agree with Nikki on the symbolic wedding. My brother and his wife got married at the court house months before they had their wedding. Our family decided to do a Caribbean destination wedding for them, had a symbolic ceremony on the beach (I asked my boyfriend to play officiator, which he did an amazing job at), booked a nice reception at a fancy venue for 50+ guests, cake, band, photographer, the whole nine yard! Half the guests knew they were already married, but it didn’t make the wedding any less special. Everyone had a blast celebrating their belated “I do”.

        So back to the topic of this article, my bf and I have been living together for 7 years now, no kids, no mortgage. He will finish residency in a couple of months and his salary will jump from upper 60K to 300K at least, and will continue to rise each year. I’m currently in residency as well, and when I’m done in a couple of years, I will be starting out at around 200K. We will both have student loans to pay back. We plan to get married next year, settle down, buy a house, and start our little family in the suburbs. I’m almost positive the better decision for our situation is to not make our marriage legal.We’ll still have a wedding and everything, but no one needs to know we aren’t legally married on paper. That’s between me and him. I haven’t discussed this with him yet, but hopefully he agrees. If not, I’ll let him read this article (thanks Sam for the great info!).

        1. I’m glad to see these comments still going because this topic is of great interest to me! I mentioned to my husband the topic of marriage (at least officially) not being “worth it” from a tax standpoint. After he was done being insulted, he mentioned the problem of inheritance. When you are married and one spouse dies, the deceased spouse’s property automatically goes to the surviving spouse without estate tax (unless you specifically designate a different beneficiary in your account). I guess there are problems with estate taxes if you are not legally married? Maybe someone could weigh in on this? His point is that by not being married, you save taxes now, but could be burned down the road.

          1. Hi Frankie! Your husband asks a great question, and my fiance and I have already looked into this. Estate taxes (and inheritance taxes if your state has it) vary state by state. Typically estates are exempt of being taxed until it reaches a certain value amount. That amount could me several million dollars or as low as about $650,000…which is still decent.

            Secondly, it’s all about titling! Your house. If it’s only in his name or only in your name and you’re worried about probate being that you’re legally unmarried, you do one simple thing: you title your assets in BOTH of your names. For example, the *mortgage* is only in my fiance’s name just because he got a better interest rate than when I tried to get on it. However, that doesn’t mean I can’t also be named on the deed. This idea would follow to anything else you want to be sure goes to each other if one passes away: vehicles, boats, rental real estate, etc.

            If you have individual bank accounts, you can make them POD (Payable on Death) to your non-legal spouse. These forms aren’t always easily found on your own, but just call your bank and tell them you’d like to add a POD name to your account. This way, if you pass away, that person listed will have access to those funds.

            For more info on state-by-state estate taxes and inheritance taxes, you can start at this link and continue Googling the topic:

            Regarding something different, social security, only legally-married couples get expect to get their spouse’s SS check if they pass away. BUT, there’s a dirty little “secret”…saw it happen to my own grandfather. His wife of 67 years passed away and because her SS check was less than his SS check, he does NOT get to continue getting her check after death. How messed up is that??!

            Have your wills written. Have you health directives written!! Yes, they can be challenged, but honestly, this is where it comes into play that no one but you guys should know that you’re not legally married. That in itself is a protection if you ask me. Even if you think a family member is “cool” with it, don’t tell them. If things ever got bad where one of you is in the hospital, you are husband and wife and no one will challenge you like they will if they know you’re not really married.

  6. I know I am late to this discussion, but you laid out the marriage penalty really well. My husband made $360,000 and I made only $47,000 last year (only worked part of the year). I thought I withheld the appropriate amount from my paycheck but because of my job (I was a SAHM the year before), we ended up owing a ton of money. The accountant ran the numbers and said I only made a net contribution of $23,000 to the household income. So that’s half my small salary that disappeared. I told my husband we would be better off getting divorced and he was not amused. So is the government telling me it’s not worth trying to find fulfillment while my kids are at school? Can you explain how my husband’s income gets taxed at 39% and I effectively get taxed at 50%? I know these a “rich people problems” and nobody will sympathize, but I put in my day’s work like everyone else. Thanks.

    1. That is correct. Government uses tax laws to persuade you to stay at home and make it uneconomical for you to find outside career interests.

      Most people have no idea about the tax penalties bc most people make less than 100k each. But discrimination is still wrong, even if you aren’t being discriminated against.

      1. Thank you very much for your thoughtful and quick response. I am shocked that I gave up my summer vacation (didn’t accrue any vacation days yet) and put my kids in camp, only to make that little. I do feel pressure from the job market to work–I feel like I would be permanently unemployable if I have another long period of unemployment at my age. But the government penalizes me for working–so I’m screwed either way. Great!

  7. How about this example?

    One person’s income is $115,000/year and the other person is $220,000/year. No children. Mortgage. Rental income.

    Thank you!

      1. Thank you for your thoughts! I also have talked about this with my tax guy and he’s gonna run our 2014 taxes with both married statuses so we can compare all 3 options (single, married separate, married joint).

        1. I wanted to follow up on this and say that @Financial Samurai is pretty much right on the money (no pun intended! lol) My fiance makes over $200K and I make over $100K. We have no children. We have a mortgage. We have rental income. We are exactly your example. We had our Enrolled Agent run our taxes as married filing jointly, and it made our taxes go up over $5,000!

          So until that marriage penalty doesn’t cost so much each year, we’re just not going to get legally married. Instead we have umbrella insurance to help protect assets if sued. We have all our major assets titled in both of our names. We have other paperwork in place to protect each other such as Advanced Health Directives, Wills, Power of Attorney, and trusts. Hope this helps!

  8. I know this is an old thread, but I saw the comment on annuities and thought I’d put my two cents in. I did well in an IRA that I had and basically wanted to just create an income stream that I could not lose in the market. With rates super low the options were not that plentiful. I stumbled into an old article I kept from the Wall Street Journal about secondary annuities. Basically what the deal is, is that you are buying other people’s payment streams that they sell to an intermediary. The returns are markedly higher than buying a single premium immediate annuity. Personally, I don’t want people to be looking at this option because it creates competition and reduces returns. I know there are a lot of people who hear the word annuity and cringe, but that’s their loss. I’m perfectly agnostic about what vehicle provides me with a safe and decent return on my money. The main issue is these products are illiquid, so if you might need the money for something else soon take a pass. Thanks for your blog and best wishes “S” man :)

  9. A big issue is USA’s immigration laws. You have no choice but to marry your long term girlfriend if she isn’t from America. She won’t be able to live in the country for long periods of time with tourist visas. The year we got married was my first year working in the US after college. I made $52,000. My wife couldn’t legally work so we were example #8. Now she works and I’m making more so we are starting to hit the marriage penalty. The government are a bunch of thieves. :)

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  12. Great article. Thanks for giving the many examples. Is there a place where I can use to play around with our numbers? Trying to toy around the idea of ‘if it is more beneficial for the lower income person not to work’.


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  14. I am a novice when it comes to tax filing and all things tax. I am newly married. Using the Turbo Tax software, I entered our income figures two ways, married filed jointly and married filed separately. The outcome of filing separately was more advantageous. How did that happen?

  15. her every cent counts

    Love this post! I was just writing a blog post on this exact topic ) because I’m of age to get married and now don’t want to!

    I want to have kids, a husband (I’m already living with my partner of 8+ years and we are going to aim to have our first kid in 2016/2017) and a stable life… just marriage seems so antiquated, silly, and costly!

    If I got married I definitely would be more interested in being a stay-at-home mother but that would be such a waste — I’m going to work and as my salary with bonus at 30 has ranged between $120k and $150k I can only imagine I will earn that or more throughout the next 30 years. Even if I consult and half that when I have young kids I’ll still make too much to see any benefit from marriage (I’m assuming my partner will make at least $50k per year if he goes the social services route he’s thinking about… he currently makes $90k.)

    I brought up the idea of NOT getting married to him today and he seems really sad about it. His parents were never married so I know it’s important to him, but I’m hoping the numbers speak louder than feelings. We can still have a ceremony and discuss our lifetime love for each other… and then pay for that ceremony and then some with the tax savings from not getting married!

    I’m still not sure… but I can’t find a good reason to actually go through with legit marriage if we both plan to keep working.

  16. Ran the calculator at $110K and $74K incomes (so $184K combined), no kids, $20K itemized deductions. Difference was only -$171. Not enough to lose sleep about.

      1. About $5k is mortage interest. The rest of the deductions are sales taxes, charity, and property taxes (doubled up this past year since paid in Jan and Dec).

  17. Wow what an eye opener. I’ve heard about the marriage penalty but never seen it laid out like this. We’re thankfully currently in the category of one person earning a lot and the other earning nothing (my wife is staying home to take care of our son). Still able to get the full child credit because of 401k and HSA contributions. I hope we can maintain this ideal situation as it’s working out great for the family.

    1. Crazy for many huh? You are in a sweet spot with your marriage situation. Congrats! Now help make everyone feel like they are benefitting financially too by spreading the world about this inequality. Thanks!

  18. love this post. Ive been preaching about the marriage penalty for years and it is the very reason my “partner” and I decided NOT to get married. most people have no idea that a significantly increased tax burden awaits them after marriage.

    When you ran your scenarios for people who have kids did you include the ability to file head of household? My partner and I make ~$220K/year combined and I file her as head of household which reduces her effective rate to ~6-7%.

  19. Incidentally I saw this article today which I thought you might find amusing:

    Yes, there is such thing as a girlfriend tax break! More reason not to get married I suppose.

  20. The scary part is how comparatively low the individual incomes have to be in order to be hit with the marriage penalty. One of the reasons me and my partner decided not to get married after we had a child is the realization that we would have to pay 10k extra in federal taxes for the privilege to be married. In the last 3 years we have saved $28k, and that is the years we counted the difference, I am sure the actual number is larger if we counted all the way back to when we moved in together.

    1. The more the government can punish, the more the government can control people to do their bidding.

      Glad you are saving $28,000 after 3 years and doing what you want to do. Don’t let the gov’t keep you down!

  21. Thomas @ i need money ASAP!

    Awesome analysis! Had no idea that the tax situation would change so dramatically in those different situations between being married and being single. Think we’ll see more high earners choose to remain single?!? What if you live together long term?

  22. This post is fantastic. I’ve always wanted to know where the sweet spot was and you did a nice job showing the breakdown. We fall in category #5 except we have 2 kids and I was always peeved when I saw my paycheck and how married filing jointly hurt my income (by about $6000 per year).

    So to be clear, the $13k marriage tax hit you calculated in scenario #5 does or does not include the hit to the lower income earner? Not understanding how the higher earner is “not so lucky financially” when the lower earner is getting hit harder (percentage wise)!

    1. Congrats for being in #5 in terms of income.

      The way I see if, if the high income earner never married the low income earner, they’d have $13,000+ more a year in example #5. Is that you? I hope s/he is worth it!

      For the low income earner, all is good cause s/he is living a better life than if s/he was single at $80,000.

  23. With a joint taxable income around $300k, I see no reason for my boyfriend and I to get married. We would pay an extra $5-6k+/year in taxes. Someone above said that we would hardly notice that money gone, but that doesn’t mean we couldn’t put it to better use than paying taxes. Even if we don’t spend it ourselves, we could use it to donate more money to causes we believe in. Or as we put it, go to Europe multiple times a year. We didn’t ask to make this much money.

  24. Sam,

    Wow. My wife is a tax accountant and 2 nights ago she told me we would be much better off not being married from a tax perspective. Basically, she ran through scenario 3 for me. However, we have been married for 20 years and love each other. What are you going to do?

    I did know someone in the 90’s who got a divorce because they wanted to sell a property that had a huge gain. I cannot recall the details though.

    1. That is weird someone in their 90s wanted to divorce due to selling a property. You can earn $500K tax free as a married couple vs. $250K as a single.

      Glad your wife and I are on the same page! But what’s $300,000 more in taxes over 20 years if you are in love, right? A Bentley… 10 round-the-world cruises… 600 RT flights to Hawaii…. tuition for two kids to private university for all four years.

      All is good when you are in love!

  25. As your income goes up, you should spend more time finding ways to reduce your taxes. I see the progressive tax system as motivation to find ways to lower your taxes. If you go out and start a business you can lower your taxes. Use the marriage penalty as an incentive to start a business or invest in income property.

    1. Small business owners get taxed the most though. You have to pay both sides of SS and Medicare. Also, because you are already in a high bracket (in your scenario), then all the added income gets taxed at the higher rate for income tax purposes. Unless, the goal is to have losses flow through from an accounting basis even though you are making money in reality. However, that strategy has a shelf life and once that is done, you are paying through the nose.

      If they have a targeted tax break to small businesses, this economy would fly.

      1. Agree with you here 100% MD. The red tape a small business has to jump through and the multiple fees and taxes a small business owner has to pay makes people NOT want to start small businesses here in California at least.

      2. You’re right on one hand, but I can also choose to invest in my business. I don’t like controls or regulation, but those are legitimate tax deductible expenses and so are the accounting/legal expenses to reduce my taxes. As a business person, I have a lot more latitude to make those decisions. Yes it reduces my profit, but I can use every other tax provision to my advantage too. For example, I deferred taxes when I used a 1031 exchange for my income property.

    2. Krantcents- This is a wonderful strategy. I highly recommend this for married couples whenever possible. Having one spouse working full time at a fairly good paying occupation with solid benefits (health insurance, etc.) and the other spouse running a small business. From financial/economic/tax/family flexibility point of view; this is the optimum.

  26. Cindy @ GrowingHerWorth

    Can I just tell you how thankful I am right now for this post (or more importantly, the comments)! I’ve spent a lot of time recently considering the financial implications of my relationship: Pensions, savings, taxes, incomes, inheritances, social security… When/whether/how you marry can have a huge impact on your financial life! Relationships are supposed to be all about love and dreams, and looking at the financial aspect makes it start to seem cold and calculated. Finances aren’t going to be the deciding factor in my relationship, but I’m glad to see I’m not the only one taking it all into consideration!

    1. No, no, more importantly is the post! Because I spent hours wracking my brains putting this post together, trying to understand all the nuances of the tax implications, etc. Without this post, there would be no comments! :)

      I like the fact that one can make up to $200,000 and marry someone she or he loves making $0 to save on taxes. That’s the one positive takeaway. It’s great if one spouse doesn’t have to work.

      1. Cindy @ GrowingHerWorth

        Well, yes, of course the post! But I love and cherish all of your posts, so that’s a given!

  27. Wow fascinating examples! I despise the marriage penalty bc it clearly shows how the government is stuck in the past. Sadly I doubt they will ever get rid of it. They have so many inefficiencies they’re not going to change anything. When was the last time a front running nominee was campaigning to get rid of the marriage tax? I can’t think of one.

    1. I can’t think of one either. Maybe if Hilary became president, she would would fight more for equality and simplicity.

      The marriage penalty tax encourages one spouse to stay home and make $0, and it encourages one person with a much higher income to never marry. I’m very disappointed with the government’s treatment of people. They should NOT mettle in the personal lives of others.

  28. I have jokingly proposed to my lovely wife that we get a divorce of convenience to pocket a couple thousand dollars of that marriage penalty we are paying! She always gives me this look that’s hard to describe. She won’t take me up on the offer, which might be a good thing. Such is the cost of love!

    You should rework this article a little and re-release it around Feb 10 next year. Just in time for Valentine’s day! Ha ha

  29. Well, I ran my numbers through the calculator and found out that my marriage bonus was 3.7% as I figured it would be pretty decent due to single income below $110k and SAHW with 4 kids.
    Kind of a perfect storm almost.
    Just for giggles, I reduced it by putting away the max 401k (both including and not including the $5,500 for catch-up contributions). Not surprisingly to me, the marriage bonus went all the way down to 1.2%.
    In all honesty, these types of calculations just keep pushing me to maxing Roth IRAs for me and DW and putting 401k back to company match.

      1. Alas, I wouldn’t suggest doing it if you are faint of heart. At times it can be downright scary … even more so than being married with dual incomes and less kids.

        With that being said, I believe that the 401k pre-tax savings will become very effective when we start loosing the huge tax deductions for the kiddos.

      1. Just think though. Instead of paying $15,000 a year during a 30 year marriage while working, one could save $15,000 a year, and therefore $450,000 during the same time.

        Think how much a couple could buy with $450,000 in today’s dollars. Wow.

        1. No Nonsense Landlord

          I am not sure how they would save $15K.

          Two high (80k+) people that are married will pay more than if they were single. If one was earning not much, then they may save, but if it doesn’t work, watch out. Alimony is a tough one with a low earner. In many states, it goes on until death or re-marriage.

        2. Sam,

          With all due respect, it’s very hard to feel sympathetic about people with a $400,000plus household income whining about taxes. $15,000 is not exactly a life changing amount for this couple (that doesn’t mean I consider it fair).

          The larger and more likely cost is the impending divorce after about seven years of marriage. That is “lifestyle alternating”!

          1. $450,000 is $450,000 Ace! Can’t poop on that!

            I could bath myself in Evian water, feed a village for a year, and buy my parents a new home for that type of money.

            The government is just going to waste it.

            1. Well sure….. The government will waste, but so does private industry, and private individuals.

              On the other hand, you would not be wealthy if it wasn’t for the stable economic environment provided by the US Government policies. And you receive numerous government tax breaks for your real estate and business ventures. The list of government provided services is way too long to list, but runs from public school education to roads and air traffic control. You benefit from these.

              You also benefit from the fact that San Francisco will not likely be invaded by any foreign army because of the very expensive but world dominating U.S. Defense Department.

            2. Well…. Yes I do pay considerable amount of tax including self-employment tax, LLC fee, etc. And I do use tax saving strategies, but I’m not anti-government.

              As a small business person, I recognize the considerable value government entities provide me, although I do frequently disagree with specific issues (well, alright, sometimes many specific issues! LOL!).

              I enjoy clean drinking water and breathable air! Regulations and code are a nuisance, but, they are written in “blood”. There are reasons for why things are done the way they are. These reasons need to be understood before changes are made.

            3. I like the link to that poor guy in California! LOL! California is quite a bit more challenging tax wise (I know from personal experience). But, it has a large population with wealth (at least real estate wealth), so there are many customers to sell too. The property tax issues are really complicated out there.

              I’m much happier in Illinois. I pay my $250 LLC fee and file my sales tax return and life is good. Not that complicated.

              I probably would never consider basing a business out of California unless it was extremely profitable (or potentially extremely profitable). If you are interested in experimenting with different small business ideas; I think it would be best to base in a different state.

          2. Once you start making 400k you will whine about taxes too. We are right in that range.. maybe 450k this year. Our taxes will end up being about 180k total (including state and payroll tax). It’s exceptionally painful. To think how many toys I could buy with these money.. instead it’s wasted on moochers and wars :(.

            1. Thank you sir for supporting our country! And also allowing folks to live more comfortable lives.

              All I ever wanted when I was paying such taxes was a “thank you” not a vilification. So, thank you!

            2. Yep, and that’s what I am doing this year. I have started to refuse work.. as it’s not worth it for me to put in more hours, considering i get to keep under 50cents on a marginal dollar i earn.

            3. Or.. could be even better. We could stage our firings at work.. get unemployment, section 8 housing, food stamps, 20 more social programs..
              Have a LOT more time, totally stress free life.. let some other sucker pay for it:)

            4. Honestly though…. It’s really stressful to be unemployed and poor. The psychological damage which the lower class lives with is very real. The human suffering is very real.

              It is so much better to be worried about tax saving strategies!

  30. My husband and I are 24 yrs old each. We both recently landed our first ‘real’ jobs out of college. We have both worked very hard throughout college( I had three separate jobs at one point) and graduated with zero debt.
    We would be paying less in taxes now if we had debt. We feel like we have been penalized for our financial planning and responsibility during college. It saddens me to say that government is not just penalizing marital commitment but commitment and responsibility of any sorts. They seem to be rewarding people who seem to make poor decisions( married or not, having kids despite low income seems irresponsible to me).

    1. Don’t forget you are still better off to not be paying the interest on the debt…the tax benefit only makes the interest lower by your marginal tax bracket…so if you paid 1000 in interest and got a 250 tax benefit (assuming 25% marginal bracket) you still paid 750 in interest…versus you not paying any interest.

      Congrats on getting through school with no debt, you are far ahead even with no tax benefit.

  31. Great post showing how differences in single vs. married tax brackets can really muddy the waters come tax time. I think everyone should do a before/after analysis when they think about getting married, if only for the clear-eyed knowledge that the couple will gain about their finances – an topic that can be such a challenge in many marriages.

    My wife and I were each in the 180k range when we got married late in the tax year, and I (somewhat jokingly) suggested we delay until the new year so that we would save 11k in taxes….she was not amused.

    However, I can’t disagree more when you say that the only financial benefit to marriage is SS survivor benefits. What about estate tax advantages, health care advantages, auto and home insurance advantages, home ownership and home capital gains tax advantages? Granted, some of those direct financial benefits are only available given certain circumstances, but what about the broader benefit of income security? There is clearly a marriage penalty if you look solely at federal income taxes, but I would argue that there are broader financial advantages to be had from marriage, irrespective of the emotional component.

    1. I have a feeling that many women are not going to be amused! :)

      It is so curious why the government would want to penalize higher income earners from having kids or getting married. Why deny love? Love is all around and should be free.

      1. I disagree that gov’t wants to penalize high income married couples. If they did, why then have all the other tax advantages I listed (most of which are only meaningful to wealthier families): estate tax advantages, gift tax advantages, home ownership and capital gains advantages. If they wanted to penalize marriage, why then include the Social Security survivor benefit you referenced? The way I see it, the marriage penalty is the govt’s way to recoup the costs of these other tax benefits.

        To me, the marriage penalty and related tax machinations seems to largely reward “traditional” 1950s style living (single-income, stay-at-home spouse, two kids and a mortgage). IMO, this speaks more to the need for an overhaul and simplification of the tax code with fewer special incentives than to any pernicious plot to pilfer the public’s (p)money.

      2. Hey I’m a woman and I’m totally on board with avoiding marriage to reduce taxes! Without kids or an intention to have them, I don’t see much point in legal marriage.

      3. Practical Patty

        Another sensible woman here who sees the financial advantages of not being legally married. Fortunately, my partner is another like minded practical man who shares the common goal of early retirement. We are both high earners with no kids. In our first year of dating, during a vacation, we heard a podcast that mentioned the marriage penalty and a quick back of the envelope calc indicated that we were saving enough to go on a great vacation every year and still have $ left over. That was enough to convince us. We both love each other and don’t need a marriage certificate to confirm our commitment to one another. So the savings pile up… I don’t feel the need for a shiny bauble on my finger nor a wedding and the associated costs. That money has been happily growing in investments and helps us knock some time off until retirement. We have been wondering though, if there are situations where we might want to get married in the future though for financial advantage. Capital gains exemption on the sale of a property certainly seems like one situation. What about just before drawing social security? We also want to make sure we have the proper legal protections in place for medical decisions and our combined assets. We live in the Castro in SF and have said that we should find a lawyer in the neighborhood that had helped same sex couples with these same issues before they had the right to marry. Funny that we are exercising our right to not marry.

        1. GoTheDistance

          I (a woman) got married late this year and am ruing not making it official Jan 1 because of the tax issue. My husband and I make approx 500 combined, split evenly and are struggling to find ways to reduce our tax burden. I wish I had looked into this issue prior to the actual event. So far, the penalties (taxes) outweigh the benefits (only emotional).

  32. Hey FinSam — Do you REALLY think that in the SF Bay Area, 250K is the perfect income — even for a married couple with child? Oh, I get the tax thing. (No really, you need to know that I GET IT…). But is there an adjustment for super expensive metros like SF and NYC? Thanks! And BTW, the benefits of being married outweigh the tax penalty, although my wife might feel differently, particularly when she is the sole wage earner — nyuk nyuk nyuk.

    1. Don’t ever let your wife stop working! We stay at home men must UNITE!

      I think $250,000 is pretty ideal for a couple or family of three. For a family of four, $400,000 – $500,000 could be good.

      How do you get away with not doing anything for money as a man Steve? Share us your secret! What does your wife due?

  33. Nice post Sam, I think marriage penalty is the worst when you have a high and a low income earner since the low income earner is really being taxed at the marginal tax rate too!

    Right now, my fiancee is in med school so we’ll get 4 years of a nice marriage bonus. After residency though, we’ll have a huge penalty. But that’s why I’m starting my own businesses right now(rental, online, etc) so that I can deduct expenses against my small business income and then contribute the rest to a solo 401k. As long as I don’t make much more than 50k should be able to tax shelter all of it :)

  34. The First Million is the Hardest

    Just ran our numbers and it looks like we’ll save 0.3% after getting married. My fiance will be happy to know that we don’t have to call the wedding off after all! :)

  35. We weren’t willing to pay any taxes, so as you know, we moved ;) Actually, we ended up eloping (but will have a formal wedding coming up soon) because that way if I wasn’t able to find a job in our new country I could be listed as a dependent on my wife’s (er, fiance’s?) work permit.

    I’ll try my hardest not to go on a rant about the government and taxes here, but it really is an archaic system that seems to have been pieced together by a bunch of blind ferrets, each with different objectives. Talk with people in/from other countries and they find it absurd that the need for personal tax planners exists for the average citizen.

    And while I may be a CPA, I avoid taxes like the plague, which is probably not what people want to hear haha. Of course, I use my designation for a different line of work than say, being an employee at H&R block.

  36. Wall Street Playboys

    The funny thing is, you’d think we would want to encourage high income earners to have more kids.

    This is going to sound “elitist” no matter how it is written but it just doesn’t make sense to give a penalty to high income earning couples.

    If you give a tax benefit to wealthy people for having kids, more likely than not the kids they have will 1) have more education, 2) be better prepared to add value to society. This does not mean that “all rich people are smarter” rather it means “rich people can provide their children with better resources to succeed”.

    A very different argument.

    Marriage in the USA really makes no sense. A couple of good friends are “married” but not legally.

    They had their wedding and ceremony yet no papers were signed. Why?

    Two reasons:
    1) the taxes will be lower as outlined here
    2) the higher income earner realized giving the government control of his assets is basically a 99% negative gamble on the court system (he knows he will lose). His wife is no slouch either clearing ~$200K. But why would they pay extra tax to the government?

    Marriage makes no sense in the USA anymore. If the girl loves you she doesn’t need a contract. A ring a ceremony and her friends and family should be enough.

    Government/court involvement is just adding complexity. The system doesn’t even have the correct reward system.

    Do we want kids to grow up with a higher probability to succeed or a lower one? And yet there is a higher tax on those that can provide better opportunities for their kids.


    1. Cindy @ GrowingHerWorth

      I wouldn’t say that marriage makes no sense in the USA anymore. It’s very much so specific to the individual situation. There are pros and cons, even outside of religious, moral, or tax reasons.

      For example, there is a 20 year age gap between my boyfriend and I. He has worked hard for a very long time, has a nice pension, and would like to retire in the next 5-10 years to pursue other dreams. I don’t NEED the piece of paper (i.e. marriage). However, the more we discuss the future, the more it seems ideal that I retire when he does; We have similar dreams, he wants me available to follow those dreams, and not working a “normal job” would give me that flexibility. Basically, he doesn’t wait until he’s in his 80’s for me to retire and us follow our dreams. In this case, I don’t want him to retire unless we are married. Why? Because if I retire at 40 or 45, I won’t have a significant amount in my own retirement accounts. If he retires single, his pension won’t pay a survivor benefit (aside from a small death benefit). If we’re married when he retires, there’s a survivor benefit that would pay until I die. He has to be married WHEN he retires for the survivor benefit to come in to play; if he gets married after retirement, the benefit is not available. Who knows, I could die first, and all this could be moot. But if he dies at 85, I don’t want to be 65, with no real income, trying to start over.

      It does take all the romance out of marriage though when it comes down to money!

      1. Those are some good, real thoughts that I’m sure others are thinking about. It’s a shame that the survivor benefits don’t go to a loved one, and must either go to the spouse or back to the government. That does NOT seem right to me. If you are paying into the system all those years, it’s yours or who you designate it to be darn it. To me, this is TYRANNY because if you don’t pay these taxes, you get fined or go to jail.

      2. This benefits you, as a woman, but no him. By marrying him, he stands more to lose from the arrangement.

    2. I would agree that the reward system is somewhat out of whack. As I have said, I think marriage is a net-positive for society. But the divorce laws of the past 50 years have had an affect – some good, some bad. If 50% of marriages end in divorce (a statistic that may be questionable), that still means 50% of marriages do not end in divorce. Would we be better off as a society without marriages at all as a stabilizing force? Maybe, maybe not. I tend to think not, but I certainly come to that conclusion from my own personal bias.

      I think this much is true. If you are only interested in building wealth, then find a partner who makes a lot of money but would allow you to split costs and do not have kids. I’m not sure how long such a relationship would really last for most people, but it would allow you to build the most wealth.

      Most (not all) want more than that. I wanted kids, but not just for the sake of having kids. I wanted kids within a marriage. I saved a lot more money before the kids and marriage. There is no doubt I would be wealthier financially without them.

      But assuming you do want marriage and will accept how many kids come your way, then the best way to build and keep your wealth is to find the right person to marry and then do not get divorced.

      In my ideal world, the tax code would incentive all the things I want incentive because I think they are good for society. Alas, we don’t live in my ideal world, and the tax code incentives things that I think should not be incentive or penalizes activities I think should not be penalized. The reward system is all screwed up for my liking.

      So I would just prefer a neutral system that treated everyone equally. Let them arrange their affairs, finances, personal relationships, investments however they see fit. Society will sort itself out in the most efficient manner – just like any other complex system. We don’t need the tax code to manipulate it.

      1. I much prefer a neutral system as well. Why should the gov’t try to persuade our personal lives? That’s not right. Why are we penalizing dual income earners too?

        Perhaps marriage is a “stabilizing factor” in society. But are we really that savage as to not have the ability to cohabitate with the ones we love and be stable as well? I’d argue divorce is extremely DISRUPTIVE, hence those who never get divorced in the first place can be considered much more stable.

        1. Thought about this for a while before coming back to post. I think you are missing the point that True Love is actually an action/choice of putting someone else before yourself, not a feeling. If you can not make a commitment to someone to go through the rest of your life with them regardless of the consequences to you then I would argue that you don’t really love them. Love grows under that level of commitment, especially during difficult situations. Failure to understand that aspect of what true love is, is a failure to understand reality as it is an unchangeable fact.

          Cohabiting is at its core a decision that I like this other person and what I get out of this relationship, but if things ever got really bad then I still want the option to leave.

          Arguing that you could commit under a cohabiting relationship without getting married because you want to avoid the current tax consequence of getting married, proves that you don’t love the person regardless of the personal consequences (that will come and go with time/tax policies/etc. . ).

          I would argue the 50% divorce rate is a product of people (religious or not) totally missing the point of marriage and/or one of the partners never really having made the choice to love the other one.

          1. These are interesting judgements you have about people who don’t get married and who get divorced. If you said this to people, I’m pretty sure you will get huge backlash from millions of people.

            Instead of judging other people, how about just sharing your relationship situation?

            1. You should know as well as I do that just because something is offensive doesn’t mean it isn’t the truth. Most times the truth is very offensive to many people. Personal finances are very much this way as well (lots of people who are making terrible self destructive choices that would be very offended if this was pointed out). So you are correct that what i expressed is very offensive to many people. However I am expressing what I believe is the truth about reality. So by the dictionary definition of judgement: “the forming of an opinion, estimate, notion, or conclusion, as from circumstances presented to the mind”, i am making a judgement. If I am wrong, I desire to know and better understand reality. If my understanding of reality is correct however, then it is actually the loving thing to do to help people understand this instead of letting them continue in their current path, causing themselves and others more harm. Of course there are different ways of doing this with varying effectiveness depending on the person.

              My guess is that you believe that truth or at least morality is relative, so you probably won’t agree or possibly understand my perspective (which has nothing to do with trying to make myself feel superior as I am very acquainted with my own failings and selfishness). I will point out that the inherent contradiction in that world view is that all truth is relative except the fact that truth is relative which is absolute (which is impossible if all truth is relative, forming a completely illogical basis).

              For your reference I have been married to my wife for 8 years and we have 3 children (6,4,2) together. I would be love to hear your perspective on why you think reality/morality is different, or explain more of what I understand it to be if you were interested. But this thread probably isn’t the best forum. Feel free to email me if you would like to.

          2. her every cent counts

            I happened to be researching this exact topic for a post I was writing today:

            The comments here are fascinating! I think marriage is a huge scam… but it’s hard to not get married in our society. I have a boyfriend, we’ve been together 8 years- and we”re going to be together for the rest of our lives and have children (hopefully) and all that – so why pay more for tax just because we want the government to approve our marriage?

            Yes there is some truth to the argument that legal marriage makes some couples stay together longer and stick it through hard times – because it’s just too complicated to get a divorce – but that doesn’t mean two people cannot force themselves into that mindset in a relationship that is a marriage for all purposes except on the legal paper. I think it’s very sad that the reason people get married — and pay more for it — is because they cannot be mature enough to remain together in sickness and health, richer or poorer. I’m very torn about this because I just expected to get married as an adult if I found my life partner and I indeed found him, but now that I know how the government will just charge us more to be married I don’t see the point (except the SS bit, but if we’re both working and making six figures then I think I still wlll do ok when I retire.)

            The only reason I see to get legally married is if one of us decides to stay home with kids one day… but we can always get married THEN… and save some cash in the meantime. Right?

      2. No Nonsense Landlord

        “If 50% of marriages end in divorce, that still means 50% of marriages do not end in divorce.”

        True, those other 50% end in death. Pick your poison…

    3. It is a head scratcher for the government to PROMOTE lower income families for having more kids with the child tax credit. You’d think it would be the opposite if kids are really tat expensive, and to grant a child tax PENALTY no?

      If you make under $50,000 and have 5 kids, for example, it might really be hard to get ahead financially.

      1. The government promotes lower income childbearing because they need more workers. You keep your working class numbers high but you keep their spirits controlled by religion and television and their social power low in order to maximize the output and profit. You don’t want the upper levels creating revolutionaries with actual monetary power; you need them to concentrate on business as usual.

  37. Couple issues on your examples

    All the examples with kids are not accurate because you are double counting the child exemptions. If person one and two really got married they would have 4 child exemptions not 2 if you were combining exemptions as you are combining everything else in their example. maybe it would be fairer to give one person 2 kids and one of them none like most real custody sharing arrangements, or just give each person one kid.

    Example 3 – child tax credit doesn’t end of 110,000 MAGI, it just starts to get phased out at an additional 5% tax rate (over the next $20000), so they technically would still be eligible for some child tax credit. This is also assuming their don’t save any in 401k or HSA which both reduce MAGI and can help keep eligibility for the child tax credit (might be worth an add in the conclusion section).

    Might be worth an example of a higher income earner say 200k marrying someone who plans to stay at home (or not earn anything). This is one of the better marriage bonus scenarios – close to $6k by my calculations.

    Important to point out that taxes are actually lower for most married people (besides high income dual earners). But even if taxes are a bit higher for some people, being married decreases a lot of other expenses due less duplication. Of course it sounds like you are trying to make the case for cohabiting vs getting married in that case. Now you are in the rhelm of morals vs just straight expense calculations.

    1. Thank you Lucas! This tax calculator was baffling as hell to figure out when kids started getting added into the mix. I played around with the inputs to provide as many variations as possible until the calculator and outputs really started to piss me off.

      Great point about the phaseout over 110,000 MAGI. I didn’t want to introduce the 401k and HSA variables to reduce MAGI because then you would see way too many more permutations. I should have just made every couple childless to make it easier, but that is obviously not realistic.

      I’ve included another example #9 of 200K marrying someone making 0 just for you and we get a $7,330 marriage tax credit, which is fantastic! Example #9 is a juiced up version of example #8, and buttresses my point #3 of the ideal income combo.

      What do you think is the total income limit MAGI for when the marriage penalty tax starts kicking in?

      1. The reason it is so difficult to peg a MAGI where dual income earners get hit with a marriage penalty is that that level is actually a permutation of the tax brackets the two earners are in, plus where phase outs are on tax credits, and how much they contribute to a 401k or other MAGI reducing vehicles (which is why examples like you did are going to be more useful then trying to control all variables at once)

        1) There is never any penalty if one spouse was not planing on working. So if you plan on having one spouse stay home with or without kids, there is no penalty. You get a bonus from this up to income of 405000 when the tax brackets fully converge. So you early retirement is your goal then you should definitely be married by the time you retire to max your marriage bonus ;-) I know you have a different view off this, but with 3 kids i can “earn” 57500 gross and pay 0% tax (which is quite a lot to live on if you have no debt). which makes tax deferred accounts like 401ks substantially better deal then ROTHs for my plan.

        2) For dual income earners- If you are below 73801 MAGI (94000 gross income) it is clear there is no penalty because tax brackets are doubled up to that point. Between there and MAGI of 148850 (169050 gross income) the penalty is usually pretty minimal due to the brackets being pretty close. Beyond that it definitely racks up quicker after that due to the non doubled brackets and credits phaseout limits.

  38. Very interesting…I’ve always wondered about the effect of the marriage penalty. My wife and I are under the $110,000 for now, but at some point in the future we might be over. I guess we better get a mortgage to get the deduction. The whole tax system is so convoluted and complex. As for social security, I don’t think it’s absurd that if a person dies early, the “benefits go back to the government.” It’s social security insurance and not a retirement savings account. If the benefits for paid to a beneficiary, I think they’d be bankrupt now. In any case, if a person dies early, the widow(er) and minor child will still collect benefits…and the widow(er) will have increased benefits.

    1. “In any case” is wrong. If you are not married, the widower does not get Social Security.

      The government probably would be bankrupt if SS didn’t get passed down to a close family member. But we are paying into the system in the form of 7.35% in taxes up to around $115,000. That is $8,000 a year in taxes to pay for your whole life to get nothing in return if you die before age 64 and so happen to be single? That’s not right.

          1. Technically it is 7.65% up until the SS cap, then it is 1.45% on everything above that for Medicare.

      1. “That is $8,000 a year in taxes to pay for your whole life to get nothing in return if you die before age 64 and so happen to be single? That’s not right.”

        No, that’s called a pension.

          1. No, I mean that is the literal definition of a pension. The price of fixed income for life is forfeiture if the actuarial tables don’t go your way. I understand the impulse to hate the method of funding (taxes), but there is nothing unfair about the product itself.

            1. The best thing about being the gov’t in that situation is that you can rewrite the rules if you don’t like the math – as many city/county/state pensioners are realizing as they face potential pension cramdowns.

              Lifetime income is compelling, but at the current low rate regime is too expensive. Better, I think, to have the 401k and then protect against longevity risk by laddering into annuities starting in the late 60s or early 70s. Of course, that assumes you’ve not blown a hole in your 401k by then.

              1. I’ve never really explored annuities beyond a basic sales pitch with my insurance co.

                Care to expand on their merits in a post or here in the comments? Sounds like you are doing well with them.

                Any strategy to consider?

            2. I don’t own annuities and won’t for many decades, if ever. I am familiar with annuities because I’m paid to be (I work as a corporate 401k and pension plan sponsor). To anyone reading this, I’d say to follow the advice of Warren Buffett and only own what you know. That includes annuities. Salesmen love to sell annuities because they (can) garner huge fees and come in so many flavors (fixed, variable, indexed, deferred, with death benefits or without). In the face of this, most consumers suffer from such an information disadvantage that my blanket advice would be to stay away (especially variable and indexed annuities, whose fee structures are often so opaque that you may as well just assume you’re getting ripped off).

              The annuity example I used above was for a plain vanilla (inarguably the best flavor) annuity called a single premium immediate annuity (SPIA). Laddering them – or buying another SPIA every 3-5 years – is a way to protect against interest rate risk (e.g., annuity prices are expensive now because of the persistently low interest rates, but maybe in 5 years they will be more normal and annuities will present a better value). Everything has caveats of course:

      2. Just re-read this post as a friend was dealing with the marriage tax penalty…you did a great job of explaining it with the examples.

        Forgot about my previous comment but I might have misunderstood the part relating to social security. I was saying that a widower or minor child would collect social security if you died early…thought you said the contrary in your post. You commented, “If you are not married, the widower does not get Social Security”…if you are not married then you are not defined by Social Security as a widower =) Also, while I do feel it’s a little unfair that an early death causes you to lose the money you paid into the social security Insurance fund…the other readers made good points relating to pensions, annuities, and also certain insurance policies.

  39. A follow up, when it comes to love and marriage and finances, it is not the marriage penalty that will kill you financially. Its the divorce. That is a wealth killer. So if you marry, make sure you marry right and don’t screw it up.

    1. Chris Minasian

      SOOO true!!!! Seeing it all around us… couples don’t want to split their assets and it gets ugly- fast!

      1. If you get married just make sure to put all your money into a non revokable trust at least 12 months prior to marriage or make them sign a prenup and or both! You might love them at the beginning but at the end make sure you do everything in your power to ensure they don’t get a penny of your hard earned money!

        I sound like an asshole but it’s just business!

        1. Yup, you sound like an a*^** and since you admit that it is ‘just business’, it confirms you are an }%^#%^. Sorry to be so blunt. I agree with ‘S’….a great marriage far outweighs everything else.

    2. The Professor

      Then again there’s the old adage- why is divorce expensive?
      Because it’s worth it.

  40. I’m old fashion and religious, so I see many benefits of marriage. I would not want to raise my kids outside of marriage, though I know many people do. But that wouldn’t work for me. I think marriage is a net positive institution for society.

    To answer your questions:

    1. Yes I am willing to pay more in taxes to be married because the benefits of marriage (for me) far outweigh the marriage penalty.

    2. I’m of the opinion that the tax code should not penalize married couples, nor should be in the marriage encouragement business (even though I am a supporter of the institution). It should be neutral on it so that people can organize their lives however they want without having to think of tax consequences.

    3. I roughly calculated the tax differences of being married though it had no effect. I was just curious. But with tax estimation software out there (turbo tax caster is a good one), I am always playing around with different scenarios (wife working, not working, # of kids, increased home mortgage, etc), so I guess I am nerdy about that.

    So I disagree with you that marriage is outdated (a different discussion for a different day), but I do think the tax code should be relatively neutral when it comes to single/married, income levels, etc.



    1. Hi S,

      Can you highlight exactly what the benefits of marriage are for you that far outweighs the marriage penalty tax? Why do you think two people can’t just be in love and have a family without being married?


      1. In a nutshell, knowing that we have committed our lives together in a sacramental covenant (as I said I am religious). That works for me. I think two people can just be in love and have a family without being married. If that works for them, great. I think it is much easier to walk away, but two people don’t have to. And certainly just being married doesn’t keep two people together. There are tangible, legal benefits to being married – just as there are certain tangible, legal benefits to not marrying. The intangible benefits are the reason I married.

        Anyway, those benefits to me far outweigh the tax penalty. Obviously, at some point the penalty may outweigh those benefits (if only married people were tax to take it to an extreme).

        1. Thanks for sharing. With a divorce rate of 50%, I’m not so sure marriage helps keep people more together. Maybe it does, but the numbers don’t look pretty.

          A senior government official once told me that the government uses religion to also get people to pay more taxes through the promotion of marriage. Furthermore, we all know that the Churches are some of the wealthiest institutions on Earth.

          I hope our country can accept all religions and people.

          1. No, the church and the government are separate although in some bible belt states there were convent marriage laws to replace no-fault divorce and some states have laws against cohabiting (not sure about enforcement), of course how a marriage license makes you less of a sinner is absurd. I’m pretty sure the jews especially during abraham didn’t need a license or stamp of approval from the pagan countries to be “married”, but that’s a almost separate issue (since conservatives try to link government marriage to religion).

        2. Yes I agree, but why should the government subsidize certain married couples and penalize the rest? The Social Security code for married couples means that if a couple (more likely a gay and lesbian couple who have been fighting for marriage), decides to equally share employment and child-rearing duties they get penalized by the social security and tax code.

          A high income earner who’s wife or husband stays at home (more likely the former), is entitled to 50% extra social security benefits for the couple, but if both had equal wages and shared responsibility, they would be penalized. Similary, a person who makes say $150,000 married filing jointly with one spouse staying at home to not pay child-care,babysitting,camps,etc is in better financial shape then two folks making $75k each.

          I don’t have a problem with marriage so much and don’t see the need to eliminate it fully. What I do have a problem is how much your taxes, social security,welfare benefits, even college tuition rely on your martial status. In addition not all states and localities have anti-discrimination statues regarding martial status. If it’s wrong to fire someone for being single or married, how is it not wrong to increase their taxes, or make them paying more in college tuition?

          That’s the problem with advocates of gay and lesbian marriage, equality is honorable, but the institution itself is too discriminatory to the unmarried. In the olden days it was worse, children were called bastards, and it was hard to divorce even in an unhappy marriage. Privatization has already partially occurred with pre-nup agreements and no-fault divorce laws. Some have criticized these, but the government has no business forcing people are being the counselor in unhappy marriages. In addition one’s health insurance should not be affected by marriage, can you imagine a wife or husband who’s marriage is falling apart and who’s agree to divorced but one is still pleading to be married so that one can be on health insurance?

          Our current tax code also favors divorce to an extent, as alimony for instance can be an above the line deduction as couples are being hit with the amt.

  41. SavvyFinancialLatina

    Wow, didn’t know that the marriage tax penalty kicked in at the $ figure. It seems like the government just wants us to keep working so that they can tax more and more out of us. Taxes + death = certainty.

    1. Cindy @ GrowingHerWorth

      The married filing separate gets even more tricky, as you can lose some of your credits that way. Example: I was helping a friend with his and his wife’s taxes. We ran the numbers both ways, and married filing separately they lost out on the educational credits for their dependent son in college, making their taxes even higher. Not sure why this happens…

      1. Because the more complicated taxes are, the more power the government has over its people. Think about all the penalties the government collects too for people who do their taxes wrong.

        If the government can charge a married couple more in taxes without having to explain why, how genius is that?

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