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Tying the Knot This Year? Add ‘Marriage Tax Penalty' to the Potential Cost

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  • A record 2.5 million weddings are expected this year.
  • It's worth evaluating how your new status as a married couple will affect your tax situation.
  • A "marriage penalty" can kick in when income thresholds, deductions and credits are not double for spouses what they are for singles.

If you're happily saying "I do" this year, be aware that the IRS can be a real buzzkill.

While many couples end up paying less in taxes after tying the knot, some face a "marriage penalty" — meaning they end up paying more than if they had remained unmarried and filed as single taxpayers.

The penalty can happen when tax-bracket thresholds, deductions and credits are not double the amount allowed for single filers — and that can hurt both high- and low-income households.

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"It used to be more pervasive before the [2017] Tax Cuts and Jobs Act," said Garrett Watson, a senior policy analyst for the Tax Foundation. "It's more common to have a marriage bonus than a penalty, but the details matter."

With a record 2.5 million weddings expected this year, newlyweds — especially those who earn similar amounts — may want to scrutinize how their married status will affect their tax situation.

For marriages taking place at any point this year, spouses are required to file their 2022 tax returns (due April 2023) as a married couple, either jointly or separately. (However, filing separate returns is only financially beneficial for spouses in certain situations.)

Here's what to know:

For higher-income couples

A bigger tax bill can come from a few different sources for higher earners.

For 2022, the top federal rate of 37% kicks in at taxable income of $$539,901 for single filers. Yet for married couples filing jointly, that rate gets applied to income of $647,851 and higher. 

"All the [income] brackets are doubled except the very top bracket," Watson said.

For illustration: Two individuals who each have $500,000 in income would fall into the tax bracket with the second-highest rate (35%), if they filed as single taxpayers.

However, as a married couple with joint income of $1 million, they would pay 37% on $352,149 of that (the difference between their income and the $647,851 threshold for the higher rate).

Other parts of the tax code can also negatively affect higher earners when they marry.

For instance, the regular Medicare tax on wages — 3.8%, which is split between employer and employee — applies to earnings up to $200,000 for single taxpayers. Anything above that is subject to an additional Medicare tax of 0.9%.

For married couples, that extra tax kicks in at $250,000.

Likewise, there's a 3.8% investment-income tax that applies to singles with modified adjusted gross income above $200,000. Married couples must pay the levy if their income exceeds $250,000. (The tax applies to things such as interest, dividends, capital gains and rental or royalty income.)

Additionally, the limit on the deduction for state and local taxes — also known as SALT — is not doubled for married couples. The $10,000 cap applies to both single filers and married filers. (Married couples filing separately get $5,000 each for the deduction). However, the write-off is available only to taxpayers who itemize.

For lower earners

For couples with lower income, a marriage penalty can arise from the earned income tax credit.

The credit is available to working taxpayers with children, as long as they meet income limits and other requirements. Some low earners with no children also are eligible for it.

However, the income limits that come with the tax break are not doubled for married couples. (Also be aware that the expanded version of the credit, in place for 2021, has not been extended for 2022.)

For example, a single taxpayer with three or more children can qualify for a maximum $6,935 with income up to $53,057 for 2022. For married couples, that cap isn't much higher: $59,187.

Other things to check for

Depending on where you live, there may be a marriage penalty built into your state's marginal tax brackets. For example, Maryland's top rate of 5.75% applies to income above $250,000 for single filers but above $300,000 for married couples.

Some states allow married couples to file separately on the same return to avoid getting hit with a penalty and the loss of credits or exemptions, according to the Tax Foundation.

Meanwhile, if you're already receiving your Social Security retirement benefits, getting married can have tax implications.

For single filers, if the total of your adjusted gross income, nontaxable interest and half of your Social Security benefits is under $25,000, you won't owe taxes on those benefits. However, for married couples filing a joint return, the threshold is $32,000 instead of double the amount for individuals.

Additionally, if you or your new spouse contribute to traditional or Roth individual retirement accounts, pay attention to how much you put in those IRAs. There are limits that apply to deductions and contributions, and income from both spouses feeds the equation.

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