Marriage penalty or marriage bonus?
You've undoubtedly heard about the so-called marriage tax penalty, the quirk in the tax law that sometimes makes married couples pay more income tax than they would if they had remained single.
Here's a little secret: Many married couples actually get a marriage bonus, paying less income tax than if they stayed single. At issue is the graduated nature of the tax system, which applies higher tax rates to higher levels of income. When you pile one person's income on top of another's on a joint tax return, it can sometimes push some of that income into a higher tax bracket.
Congress has taken steps to reduce the impact of the marriage penalty. The ceilings for the top of the 10 percent and 15 percent brackets on joint returns are precisely twice as high as the ceilings on single returns (that was not always the case). As incomes rise into higher brackets, though, the tax ceilings on a joint return aren't quite double the ceilings on a single return. That can cause a marriage penalty, but it doesn't guarantee one.
The more unequal two spouses' incomes, the more likely that combining them on a joint return will pull some of the higher-earner's income into a lower bracket. That's when the marriage bonus occurs.
On the other hand, when the two spouses have more equal incomes, and they are both substantial, the odds of getting hit with the marriage penalty go up.