(Picture by Brooke Sutton/Getty Photographs)
Final week, everybody (besides maybe the residents of North Sentinel Island) discovered that Travis Kelce had taken a knee to suggest to Taylor Swift. When Swift introduced their engagement, followers celebrated — it felt just like the traditional fairy-tale second when the highschool quarterback marries the homecoming queen. For a lot of, it was a reminder of a less complicated, extra healthful time thought to have been misplaced in immediately’s tribalistic period. Like many others, I want them nicely, hope they’ve numerous kids, and that they set an instance for contemporary marriages.
The U.S. Treasury additionally needs them nicely as a result of their marriage may imply a yellow flag from the IRS, due to the wedding penalty.
The “marriage penalty” happens when a married couple pays extra in earnings taxes than they might have if every partner had filed as single.
This penalty usually impacts high-income {couples}. For 2025, the highest federal tax price stays 37% for particular person filers with incomes over $626,350. However for married {couples} submitting collectively, the 37% threshold isn’t doubled to $1,252,700. As a substitute, it kicks in at $751,600.
The identical applies to capital positive factors. The highest long-term capital positive factors tax price of 20% applies as soon as a single taxpayer’s earnings exceeds $518,901. However for married {couples} submitting collectively, the 20% price applies as soon as their mixed earnings exceeds $583,751 — not $1,037,802, which might be the doubled threshold.
One other manner the wedding penalty can seem is thru misplaced deductions. For instance, the scholar mortgage curiosity deduction begins to part out as soon as earnings exceeds $85,000. A single filer incomes $65,000 qualifies. But when that individual marries and the couple’s joint earnings exceeds $200,000, the deduction disappears.
The state and native tax (SALT) deduction works equally. Whereas the One Large Lovely Invoice Act raised the deduction cap to $40,000 from $10,000, it didn’t double the cap for married {couples} submitting collectively. If every partner filed individually as single, every may declare the total $40,000.
That stated, the wedding penalty is often not that prime. For instance, suppose a pair earns $1.4 million, with every partner incomes $700,000. Submitting individually as singles, every would owe $216,020 in federal earnings taxes — for a complete of $432,040. Submitting collectively, nevertheless, their tax invoice can be $442,062. That’s a $10,022 distinction — or a 2.3% enhance.
As a result of tax regulation is complicated, particularly for top earners, the precise penalty might be greater or decrease than on this simplified instance. With September already right here, {couples} would possibly take into account consulting a tax skilled to estimate whether or not they’ll face a wedding penalty by 12 months’s finish.
For {couples} contemplating marriage, one choice to keep away from the penalty is to register as home companions (RDPs) in states that permit it. The IRS requires RDPs to file as single or head of family, although they have to file as married (both collectively or individually) on the state stage. This usually means submitting two federal returns as single whereas additionally submitting one or two state returns — hardly a easy answer.
Others could select to cohabitate with out marrying — not solely for tax causes. Probably the most well-known instance is Kurt Russell and Goldie Hawn, who’ve lived collectively since 1983 with out marrying. Whereas the IRS typically respects submitting standing, it has often challenged long-term preparations.
A notable case was Boyter v. Commissioner. A Maryland couple obtained fast international divorces in Haiti and the Dominican Republic on the finish of tax years 1975 and 1976, solely to file as single people and cut back their tax legal responsibility. They remarried quickly after. The IRS argued the divorces had been invalid below Maryland regulation and, alternatively, that they had been shams to not be acknowledged for federal tax functions.
Will the wedding penalty ever be eradicated? In all probability not. Most individuals marry for love, not tax advantages, and solely a comparatively small group of taxpayers is affected.
The wedding penalty doesn’t simply apply to rich energy {couples}. With cautious planning, many {couples} can both keep away from it or at the least soften the blow — and the cash saved would possibly even cowl an anniversary present.
Steven Chung is a tax legal professional in Los Angeles, California. He helps individuals with primary tax planning and resolve tax disputes. He’s additionally sympathetic to individuals with giant scholar loans. He might be reached through electronic mail at [email protected]. Or you may join with him on Twitter (@stevenchung) and join with him on LinkedIn.
