What is Marriage Penalty IRS Tax Brackets

By | January 23, 2014

Information about the Marriage Penalty

Most people think that getting married will magically lower their taxes, however, the marriage penalty exists and may actually cause some taxpayers to pay more in taxes after they get married. The following article examines the marriage penalty and explores other tax deductions for people who just got married.


What is Marriage Penalty IRS Tax Brackets

The IRS allows some limited relief from the marriage penalty in the tax rate bracket. Some examples include expanding the joint filer’s 15% tax bracket to twice the single filer’s 15% bracket. It is important to not though that those changes do not address the marriage penalty effect under the rates for joint filer’s income taxed at rates above 15%. This marriage penalty will apply to a large amount of taxpayers.


Examples of the Marriage Penalty

In addition to the marriage penalty caused by the rate structure, other tax laws enforced by the IRS also have the effect of penalizing married taxpayers in different manners because it limits how they take deductions or credits.  These penalties don’t apply to everyone, or in every year, but they still mean more tax when they do start affecting a taxpayer.


Here’s a list of some of the more common marriage penalties:

  • Lower trigger for reduction of itemized deductions: Itemized deductions are limited by the tax laws. A married couple’s itemized deductions are reduced if their adjusted gross income (AGI) exceeds $305,050 (for 2014). If single instead of being married, each could have AGI of $254,200 ($508,400 total) before the reduction in itemized deductions would begin to apply to their taxes. Careful planning could help maximize the value of itemized deductions.
  • Lower capital loss deduction: A married couple can deduct capital losses up to $3,000 total. The same two persons, if single, could deduct a total of $6,000 ($3,000 each).Thus, the married coupled is being penalized up to $3,000 for being married because they will be able to deduct a lower amount of capital losses.
  • Lower threshold for personal exemption phaseout: The personal exemption phaseout applies when AGI exceeds $305,050 for a married couple (for 2014). If single, each could have AGI of $254,200 ($508,400 total) before the phaseout would kick in.
  • Reduced passive activity loss deduction for active rental real estate owner: A married couple who actively participate in renting out real property can deduct up to $25,000 of loss from the activity, if their modified adjusted gross income is $100,000 or less. If single, each would get an up to $25,000 deduction (up to $50,000 total) and each could earn $100,000 ($200,000 total).


Marriage Benefit Instead of Penalty

On the other hand, there could be a marriage benefit instead of marriage penalty when there is a big gap between the incomes of both married people. This will allow the married couple to have wider income tax brackets and more income taxed at lower rates.