The marriage tax benefit over the marriage penalty tax

Feb 14, 2024

Marriage, Financial planning

When wedding bells ring… does the tax man sing? When you get married, the transition from single to married has both legal and tax implications. Maybe you’ve come across the term “marriage penalty tax” and not known what it means, or maybe you’ve been wondering if your taxes change after getting married. 


This article will teach you what the marriage penalty tax is, highlight when you may owe more in taxes after tying the knot, or if you could actually receive a marriage tax benefit. 


After you get married, April showers usually brings a new question: should we file separately? Or jointly? Is one better than the other? Couples who owe more in total taxes when filing jointly vs filing individually experience a marriage penalty tax. Luckily, after the Tax Cut And Jobs Act of 2017, the marriage penalty tax was cleaned up which reduced the impact for most married couples.


Let's take a look at the 2024 income tax brackets released by the IRS to see where the marriage penalty tax currently kicks in. From the table below, we can also get an idea of how singles getting married can potentially save on taxes too. 


Before making any tax moves, please consult with a tax professional who can provide in-depth advice on your unique and individual circumstances. The information provided in this article is not tax advice and is offered for general educational purposes only. If you have tax-related questions or require assistance with tax preparation and filing, please consult a licensed tax professional or qualified attorney.



What does this mean for the 99%?


As a modern couple, there will probably be the normal question of whether we should file separately or jointly. If you’re under the $731,200 in taxable income like most of us, you’ll get the same taxation rate either way. That means the marriage penalty tax doesn’t apply.


Roughly 95% of married couples nowadays choose to file jointly. The tax code even encourages married couples to file together because in most cases it results in the equivalent or better tax advantages (especially once you take deductions or credits into account). Filing one tax return versus two also saves time and can result in fewer filing fees if you use tax software or hire a tax professional.


It’s also worth pointing out that each year, married couples can choose to file one joint tax return together or file two separate returns using married filing jointly status. Couples can flip flop between the two filing statuses from one tax year to the next as often as they choose. 


So does this mean there’s actually a marriage tax benefit?


So if most married couples don't pay a marriage penalty tax…. Is there a tax benefit? There is - and it occurs most often when one partner earns more than the other partner.


Marriage Tax Benefit Example #1: Big Income Differences


Let's say Sally makes $350,000 as an executive and meets John who makes $33,000 as a high school tennis coach. 


As a single person making $350,000, Sally is in the 35% marginal income tax bracket. However, if Sally marries John, their combined household income rises to $383,000, dropping them in the 24% marginal income tax bracket.


By marrying John, Sally saves herself about $11,882 in income taxes. Sure, John's income moves up from a 12% marginal tax rate to a 24% marginal tax rate. However, John's increase in income taxes is more than offset by a decrease in Sally's income taxes.


Marriage Tax Benefit Example #2: Stay At Home Parent


Let's say after grinding for 15 years in banking, Bob, 37, can no longer take it anymore. He plans to give up his $250,000 a year base salary job next year and backpack around Southeast Asia. 


While in Bali, Bob meets Nancy, 33, who is on a one-month sabbatical from her equally demanding job as a lawyer making $285,000 a year. 


Serendipitously, Bob and Nancy fall in love. Six months later, when they’re both back in San Francisco, Bob proposes and Nancy says “yes!”


By getting married, Nancy goes from a marginal income tax bracket of 35% down to 24% because Bob wants to be a stay-at-home dad. That’s right! Nancy is pregnant and expecting soon. 


By getting married, Nancy saves about $8,682 in income taxes. Bob and Nancy can now use the $8,682 to buy lots of diapers, bibs, formula, and onesies. 


For couples with widely divergent incomes or those considering having one partner stay at home to raise a family, there may be an additional tax benefit to getting married & filing jointly. 


Not only may you receive a marriage tax benefit after getting married, each of you will also be eligible to receive a Social Security death benefit if one partner were to pass away.


As an unmarried person with no children, your Social Security payments are returned to the government, even if you spent decades paying the Social Security tax. 


Ouch. 


Marriage penalty tax threshold begins at $731,201 for 2024


Based on the 2024 income tax brackets announced by the IRS, the marriage penalty tax begins when the combined household taxable income surpasses $731,200. After a married couple earns more than $731,200 and up to $1,218,700, they have to pay an additional 2% tax compared to when they were earning income separately.


Let’s give you an example. Assume you had a couple earn $1,218,700. Because they are filing jointly, they will pay an additional $9,750 in taxes. They have the same marginal tax rate (that’s the same % for each additional dollar). 


Given a top 1% household income is around $650,000 in America as of 2023, less than 1% of married households will pay the marriage penalty tax. Despite the rarity of paying a marriage penalty tax, it's still worth understanding how it happens. 


The nitty gritty of calculating the marriage penalty tax


For most of us, the income tax rate will be the same whether you’re filing separately or filing jointly if you’re below a $731,200 income (which is 99% of this country), meaning the tax question is at least a bit simpler. Because the income threshold for married files is double the single filers, there is equality in tax treatment between singles and married filers up until the $731,200 income.


Starting at the 35% marginal income tax bracket, the income threshold for married filers no longer doubles. If it did, the married filers income range would be $487,451 - $1,218,700, which is double the single filers income range of $243,726 - $609,350.


Instead, the IRS has determined $731,200 is the upper income limit for married filers to pay the 35% marginal tax rate. Every dollar earned after $731,200 as a married filer will face a 37% marginal income tax rate.


Only the government can explain in this land of equality why one plus one doesn't equal two. But by knowing what the government believes is fair, you can adjust your income and career aspirations accordingly. 


Now let's pretend two individuals equally earn $365,600. If these individuals get married, their combined household income is $731,200. They would pay the same amount of income tax as if they were still single. However, every dollar earned above $731,200 up to $1,218,700 would face an additional 2% marriage penalty tax.


$1,218,700 is calculated by doubling the top income threshold for singles ($609,350) in the 35% tax bracket. 


How to avoid the marriage penalty tax


You always have the ability to choose to file separately vs. jointly. You can even swap each year. But remember, your tax rate is the first piece of this decision.


Now that we’ve walked you through the pros and cons for the tax rate… the other piece to consider is whether you have better benefits for tax deductions or tax credits if you file separately or jointly.


There are countless possible marriage income permutations that can play out over time. Feel free to input your numbers and make some forecasts by visiting the marriage tax calculator at the Tax Policy Center


Run The Numbers Before And After Getting Married


As a modern couple who carefully makes financial decisions, it's worth calculating whether you will be paying a marriage penalty tax or receiving a marriage tax benefit. This way, you can plan your careers and lives accordingly.


Although we don’t recommend making partnerships based on taxes, it doesn’t hurt to understand all the financial implications of a marriage. 


At Plenty, we help modern couples make better financial decisions. 


Sign up for an account with Plenty today!


- Team Plenty


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Plenty was founded to democratize access to financial products and tools that accelerate wealth building. Plenty Financial and affiliated entities. (“Plenty Financial”) provide a web, mobile, personal financial management and educational platform to consumers; some of these tools are freely accessible to all consumers, others require a fee-based subscription. Advisory services are provided in the form of software-first financial planning and investment advisory services for fee-based Subscribers. Plenty Financial RIA, LLC is an SEC-Registered Investment Advisor. All investments made are legally owned by you. Investing is inherently risky and Plenty does not guarantee positive performance. Investments are held in accounts at BNY Mellon | Pershings, the world's largest securities servicing company and are SIPC insured. Investing involves risk, including the possible loss of principal, and there is no assurance that the investment will provide positive performance over any period of time.


Brokerage services are provided by Atomic Brokerage LLC "Atomic Brokerage", member FINRA and SIPC. Clearing and custody services are provided by Brokerage firm BNY Mellon Pershing, member SIPC. Plenty Financial RIA, LLC has a relationship with Atomic Brokerage to manage and execute investments on behalf of customers. Subadvisory services are offered through Atomic Invest LLC ("Atomic Invest"), an SEC-registered investment advisor, member SIPC. Atomic Invest was formerly known as Helium Advisors LLC.


Return data used in the interactive tool are hypothetical performance data which contains inherent limitations and is not a substitute for actual investment returns derived from a live portfolio. There are numerous risk factors related to trading and markets which cannot be fully accounted for when depicting Hypothetical Performance. Consequently, future returns are not guaranteed, and a loss of principal may occur. THIS IS FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE RELIED UPON AS INVESTMENT ADVICE. This site/application has been prepared by Plenty and is not intended to be (and may not be relied on in any manner as) legal, tax, investment, accounting or other advice or as an offer to sell or a solicitation of an offer to buy any securities of any investment product or any investment advisory service. The information contained in this site/application is superseded by, and is qualified in its entirety by, such offering materials. This site/application may contain proprietary, trade-secret, confidential and commercially sensitive information.


By accessing this site, you signify your agreement with and understanding of the following Terms of Use and Legal Information pertaining to both this site and any material in it. Plenty owns and maintains this site. No act of downloading or otherwise copying from this site will transfer title to any software or material at this site to you. Anything that you transmit to this site becomes the property of Plenty, may be used by Plenty for any lawful purpose, and is further subject to disclosure as deemed appropriate by Plenty, including to any legal or regulatory authority to which Plenty is subject. Plenty reserves all rights with respect to copyright ownership of all material at this site, and will enforce such rights to the full extent of the law.


Plenty was founded to democratize access to financial products and tools that accelerate wealth building. Plenty Financial and affiliated entities. (“Plenty Financial”) provide a web, mobile, personal financial management and educational platform to consumers; some of these tools are freely accessible to all consumers, others require a fee-based subscription. Advisory services are provided in the form of software-first financial planning and investment advisory services for fee-based Subscribers. Plenty Financial RIA, LLC is an SEC-Registered Investment Advisor. All investments made are legally owned by you. Investing is inherently risky and Plenty does not guarantee positive performance. Investments are held in accounts at BNY Mellon | Pershings, the world's largest securities servicing company and are SIPC insured. Investing involves risk, including the possible loss of principal, and there is no assurance that the investment will provide positive performance over any period of time.


Brokerage services are provided by Atomic Brokerage LLC "Atomic Brokerage", member FINRA and SIPC. Clearing and custody services are provided by Brokerage firm BNY Mellon Pershing, member SIPC. Plenty Financial RIA, LLC has a relationship with Atomic Brokerage to manage and execute investments on behalf of customers. Subadvisory services are offered through Atomic Invest LLC ("Atomic Invest"), an SEC-registered investment advisor, member SIPC. Atomic Invest was formerly known as Helium Advisors LLC.


Return data used in the interactive tool are hypothetical performance data which contains inherent limitations and is not a substitute for actual investment returns derived from a live portfolio. There are numerous risk factors related to trading and markets which cannot be fully accounted for when depicting Hypothetical Performance. Consequently, future returns are not guaranteed, and a loss of principal may occur. THIS IS FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE RELIED UPON AS INVESTMENT ADVICE. This site/application has been prepared by Plenty and is not intended to be (and may not be relied on in any manner as) legal, tax, investment, accounting or other advice or as an offer to sell or a solicitation of an offer to buy any securities of any investment product or any investment advisory service. The information contained in this site/application is superseded by, and is qualified in its entirety by, such offering materials. This site/application may contain proprietary, trade-secret, confidential and commercially sensitive information.


By accessing this site, you signify your agreement with and understanding of the following Terms of Use and Legal Information pertaining to both this site and any material in it. Plenty owns and maintains this site. No act of downloading or otherwise copying from this site will transfer title to any software or material at this site to you. Anything that you transmit to this site becomes the property of Plenty, may be used by Plenty for any lawful purpose, and is further subject to disclosure as deemed appropriate by Plenty, including to any legal or regulatory authority to which Plenty is subject. Plenty reserves all rights with respect to copyright ownership of all material at this site, and will enforce such rights to the full extent of the law.


Plenty was founded to democratize access to financial products and tools that accelerate wealth building. Plenty Financial and affiliated entities. (“Plenty Financial”) provide a web, mobile, personal financial management and educational platform to consumers; some of these tools are freely accessible to all consumers, others require a fee-based subscription. Advisory services are provided in the form of software-first financial planning and investment advisory services for fee-based Subscribers. Plenty Financial RIA, LLC is an SEC-Registered Investment Advisor. All investments made are legally owned by you. Investing is inherently risky and Plenty does not guarantee positive performance. Investments are held in accounts at BNY Mellon | Pershings, the world's largest securities servicing company and are SIPC insured. Investing involves risk, including the possible loss of principal, and there is no assurance that the investment will provide positive performance over any period of time.


Brokerage services are provided by Atomic Brokerage LLC "Atomic Brokerage", member FINRA and SIPC. Clearing and custody services are provided by Brokerage firm BNY Mellon Pershing, member SIPC. Plenty Financial RIA, LLC has a relationship with Atomic Brokerage to manage and execute investments on behalf of customers. Subadvisory services are offered through Atomic Invest LLC ("Atomic Invest"), an SEC-registered investment advisor, member SIPC. Atomic Invest was formerly known as Helium Advisors LLC.


Return data used in the interactive tool are hypothetical performance data which contains inherent limitations and is not a substitute for actual investment returns derived from a live portfolio. There are numerous risk factors related to trading and markets which cannot be fully accounted for when depicting Hypothetical Performance. Consequently, future returns are not guaranteed, and a loss of principal may occur. THIS IS FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE RELIED UPON AS INVESTMENT ADVICE. This site/application has been prepared by Plenty and is not intended to be (and may not be relied on in any manner as) legal, tax, investment, accounting or other advice or as an offer to sell or a solicitation of an offer to buy any securities of any investment product or any investment advisory service. The information contained in this site/application is superseded by, and is qualified in its entirety by, such offering materials. This site/application may contain proprietary, trade-secret, confidential and commercially sensitive information.


By accessing this site, you signify your agreement with and understanding of the following Terms of Use and Legal Information pertaining to both this site and any material in it. Plenty owns and maintains this site. No act of downloading or otherwise copying from this site will transfer title to any software or material at this site to you. Anything that you transmit to this site becomes the property of Plenty, may be used by Plenty for any lawful purpose, and is further subject to disclosure as deemed appropriate by Plenty, including to any legal or regulatory authority to which Plenty is subject. Plenty reserves all rights with respect to copyright ownership of all material at this site, and will enforce such rights to the full extent of the law.