​Marriage Penalty Return to Change Tax Deduction for Couples

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January 28, 2012
Also: Earned Income Tax Cut, Fiscal Cliff, Marriage Penalty, Marriage Penalty Return, Married Couples

Marriage Penalty Return – It’s been called the marriage penalty by tax planners because of the unbalance income ranges as it returns in 2013, which will change standard deductions.

The deduction started with the Bush tax cuts as married couples get a standard deduction, which is about twice that of individual taxpayers, and the income ranges for the 10% and 15% tax brackets are also doubled.

That was a pleasant for most couples because prior to 2001, many of them had paid a “penalty” because their standard deduction and income tax brackets were less than twice those of singles.

While the standard deduction for single filers should rise to $6,100, married couples would receive a deduction of only $10,150 if lawmakers don’t extend the provision, according to estimates by the Tax Foundation. To erase the marriage penalty, it would have to be $12,200.

Married couples would also be moved into higher tax brackets more quickly. Individual taxpayers would be in the 15% tax bracket until they hit $36,250 in taxable income, but married filers could be pushed above it after only $60,550 in income, as opposed to $72,500.

The marriage penalty never went away for higher tax brackets above 15% — and that would continue to be the case. Even if the Bush tax cuts are extended, the 25% bracket would end at $87,850 for singles, but only at $146,400 for joint filers. And the highest bracket starts at the same income level regardless of whether the filer is a married couple or a single person.

Married couples benefiting from the Earned Income Tax Cut would also get hit if the fiscal cliff isn’t addressed.