What the “Marriage Tax Penalty” Means and How to Avoid It

James D. Klaffer is a senior director of High-Net-Worth Tax Planning at Northwestern Mutual. 

Getting married is a big step in any relationship. In addition to finding your life partner, it comes with some financial perks. Spouses can usually piggyback on their partner’s health insurance plan, and they typically have built-in inheritance rights. There are also some tax benefits of marriage, like the ability to claim a higher standard deduction.  

But in some cases, married couples might actually pay more in taxes than they would on their own—a situation referred to as the “marriage tax penalty.” To be clear, it isn’t an actual penalty or fine. It simply refers to some married people having a higher tax bill than they did when they were single. Whatever name you use, knowing how it works can help you prepare to navigate your taxes after saying “I do.” 

How getting married can affect your taxes 

Deciding to get married means that you’re ready to share your life, and your money, with someone else. Since you’re probably used to managing your money on your own, it’s a good idea to talk through a few money topics before you start combining your finances:

• What’s your budgeting style? 

• Should we have joint accounts, individual accounts or both? 

• What financial goals are you working toward? 

• What does your debt and credit health look like? 

• Are you saving for retirement? 

• How often do you want to chat about money? 

• How will our tax liability change now that we’re married? 

That last one can be easy to overlook. How much you ultimately pay in taxes will depend on your income and tax-filing status. Marriage may result in a lower tax bill—or could put you on the hook for a higher tax bill.  

What is the marriage tax penalty? 

The marriage tax penalty occurs when a married couple pays more income taxes than they would if they were unmarried. This can happen if:

• Your joint income pushes you into a higher tax bracket. 

• You file your tax return in a way that leads to a larger tax liability. For example, depending on your situation, you may qualify for fewer tax credits and lower tax deduction amounts as a couple than you would if you were single. 

While the IRS does offer some tax breaks for married couples, you’ll need to meet certain criteria to take advantage of them. As for the marriage tax penalty, the Tax Cuts and Jobs Act (TCJA) has made it less likely for low- to middle-income earners.

Why do I owe more taxes after getting married? 

The most common “marriage penalty” hits couples who both earn substantial salaries. Since the TCJA, in nearly all cases, tax brackets for married individuals are twice the amount a single filer would pay. The exception is the top (37 percent) bracket. As a single person you cross from the 35 percent tax bracket into the 37 percent bracket when you earn $626,350 or more. When you combine your income as a married couple, you cross into that highest bracket on income above $751,600. 

Here are some more examples of how getting married could result in a higher tax bill.

• Both partners are low earners. In this case, an elevated joint income could disqualify you from certain tax credits or deductions.    

• Joint earnings are high enough that you’re now subject to the Medicare surtax or net investment income (NII) tax. 

• You have high earnings and owe long-term capital gains tax. Capital gains brackets work similarly to regular income tax brackets, in which you pay more as you earn more. The top tax bracket threshold doesn’t double from single to married filers. 

• You have a large mortgage. Taxpayers can currently deduct home mortgage interest on the first $750,000 of their home loan (assuming they bought the home after December 16, 2017). Keep in mind that couples who have a larger mortgage will not be able to write off the full amount of paid interest.  

• Similarly, if you have student loans, married couples may not be able to deduct as much as they could when they were single. 

How can I avoid the marriage tax penalty? 

While there’s no way to avoid paying the taxes you owe, including higher taxes due to the marriage tax penalty, there are strategies that you can use to reduce the impact of taxes.

• Contribute to retirement accounts. Contributing to accounts like a 401(k), if one is available for you, reduces your taxable income in the year you make your contribution. This can be especially beneficial if you’re in a high tax bracket.

• Contribute to a Health Savings Account (HSA). If you have an HSA available to you, this account also allows you to set aside pre-tax money.

• Maximize tax deductions. If you itemize your deductions, make sure you’re taking advantage of everything that’s available to you. Depending on your situation, you could also consider bunching your itemized deductions.

• Consider tax-loss harvesting. If you have a large investment account, a tax-loss harvesting strategy can help you reduce the impact of taxes.

No matter how it shakes it out, managing your taxes as a married couple might feel tricky. Your Northwestern Mutual financial advisor can work alongside your tax professional to help you build a financial plan that identifies blind spots (like potential tax issues) and opportunities to help you feel more confident that you’ll be able to achieve your goals.

This publication is not intended as legal or tax advice. This information was compiled by the advanced planning attorneys of The Northwestern Mutual Life Insurance Company. It is intended solely for the information and education of Northwestern Mutual Financial Representatives, their customers, and the legal and tax advisors of those customers. It must not be used as a basis for legal or tax advice, and is not intended to be used and cannot be used to avoid any penalties that may be imposed on a taxpayer. Northwestern Mutual and its Financial Representatives do not give legal or tax advice. Taxpayers should seek advice based on their particular circumstances from an independent tax advisor. Tax and other planning developments after the original date of publication may affect these discussions.