Another Look at the Marriage Penalty

Many benefit and deduction amounts for married couples are less than twice the amount available for single individuals. Those provisions can cause married couples to pay more in income taxes than if they were single, a situation often referred to as the “marriage penalty.” Previous tax legislation has partially cured the marriage penalty problem temporarily, and the American Taxpayer Relief Act of 2012, also known as “fiscal cliff” legislation makes this relief permanent.

  • The standard deduction for married couples filing jointly is now double the amount for single taxpayers. For 2015, the standard deduction for married couples filing jointly is $12,600, while married couples filing separately use the single taxpayer amount of $6,300 (up from $12,400 and $6,200 respectively for 201

 

  • The lowest two tax brackets for married couples filing jointly are twice as wide as the brackets for single taxpayers. Since only the lowest two tax brackets are twice the size of single tax brackets, this provision does not completely eliminate the marriage penalty.

In some circumstances, it may make sense for married couples to file separately. There is no easy way to determine whether you should file jointly or separately (see box below). Typically, you need to figure your income tax both ways to decide.

Are Two Tax Returns Better than One?

In general, a married couple pays less tax overall by filing a joint federal tax return than they would if they file separate returns. But that’s not always the case. Depending on your circumstances, it sometimes makes sense to file separately. This is especially true if one spouse has an extraordinary amount of medical expenses, miscellaneous expenses or casualty losses.

To illustrate this point, let’s say you earn $80,000 a year as a computer programmer and your spouse earns $20,000 a year from a part-time job as a teacher. You incurred only $500 in unreimbursed medical expenses for the tax year. However, your spouse needed periodontal work that cost $5,000 and had $2,000 in other unreimbursed medical expenses ($7,000 total).

If you file a joint tax return, you get no medical expense deduction because your medical expenses do not exceed 10 percent of your adjusted gross income or AGI (unchanged from 2014). However, if you file separate returns, your spouse can claim a deduction of $5,000 ($7,000 less 10 percent of $20,000). The difference is due to the fact that your spouse’s AGI is lower than yours and her $7,000 in medical expenses is a relatively high percentage of the family’s total expenses.

Caution: Filing separate returns can have other ramifications. For example, if you file separately, you can no longer claim benefits such as the dependent care credit. In addition, filing separately on the federal level may affect your state tax return.

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