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Background: The amount of income subject to the two lower tax brackets (10 percent and 15 percent) for married taxpayers filing jointly is exactly twice as large as the amount of such income for single taxpayers. However, the tax brackets above 15 percent cover a larger total amount of income for two single taxpayers than for two taxpayers who are married.

For example, in 2015, two unmarried taxpayers can each have $90,750 of taxable income before they hit the 28 percent bracket. On the other hand, if they are married, their combined taxable income over $151,200 will be taxed at a rate starting at 28 percent. Also, on a joint return, the 33 percent rate begins at $230,450, the 35 percent rate starts at $411,500, and the 39.6 percent rate starts at $464,850.

On the other hand, two unmarried taxpayers with substantially equal amounts of income can have as much as $378,600 ($189,300 × 2) of taxable income before being in the 33 percent bracket, $823,000 ($411,500 × 2) before being in the 35 percent bracket, and $826,400 ($413,200 × 2) before being in the 39.6 percent bracket.

Thus, there is a marriage penalty when, for example, married taxpayers’ combined income will cause part of their income to be taxed at a rate above 25 percent, when none of their income would be taxed at a rate above 25 percent if they filed as single individuals.

NOTE: A taxpayer’s marital status for the entire year is determined as of Dec. 31. A taxpayer who gets married (or divorced) on that date is treated as if he were married (or single) all year long.

Illustration 1: John and Jess are planning to get married. Jess expects to have $300,000 of taxable income in 2015, and John expects to have $250,000. Their combined taxable income for 2015 will be $550,000. If they get married before 2016, and file a joint return for 2015, they will owe income taxes for 2015 of $163,715.90. If they delay their marriage until 2016, then for 2015, Jess will owe taxes of $82,606.25, and John will owe $66,106.25, for a combined tax of $148,712.50. This will be $15,003.40 less than they would owe if they married in 2015 and filed a joint return for 2015.

If John and Jess married in 2015 and filed separate income tax returns for 2015, John would owe income taxes of $71,957.95 on taxable income of $250,000, and Jess would owe income taxes of $91,757.95 on taxable income of $300,000. The combined amount they would owe would be $163,715.90, the same amount they would owe if they filed a joint return for 2015.

Marriage bonus implications for year-end planning: If only one of the prospective spouses has substantial income, marriage and the filing of a joint return will usually save taxes, thus resulting in a marriage bonus. In such a case, it will probably be better to defer income until next year if they will be married next year, or, if they are in the planning stage, to accelerate the marriage into this year if feasible.

Illustration 2: Same facts as in Illustration 1, except John expects to have taxable income of $25,000 in 2015, and Jess expects to have taxable income of $525,000. If they get married before 2016, and file a joint return for 2015, they will owe income taxes for 2015 of $163,715.90. If they delay their marriage until 2016, then John will owe income taxes of $3,288.75 for 2015, and Jess will owe income taxes of $164,269.05. Their combined income taxes will be $167,577.80 in 2015 if they file as single taxpayers, or $3,841.90 more than they would pay if they filed a joint return for 2015.

Depending on the taxpayers’ income, marriage and the filing of a joint return may not only result in a marriage bonus because of the tax-rate structure, but also produce tax savings in the form of bigger deductions based on adjusted gross income, or smaller AGI-based tax hikes.

Credit: Accounting Today

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