Why Are Taxes More When Filing Jointly?

Married couples must choose tax filing options wisely.

The so-called "marriage penalty" is a conundrum in which married taxpayers may pay more taxes on a joint return than two individuals would filing separately. This may occur when both spouses have earned income; couples with only one wage earner rarely encounter this problem. Thanks to recent tax law changes enacted by Congress, the marriage penalty has been temporarily eliminated from the tax code; unfortunately, it could return one day. To avoid the marriage penalty, the Internal Revenue Service recommends that a couple calculate their taxes using both methods -- married filing jointly and married filing separately -- to determine which produces the lowest tax liability and file accordingly.

Earn More, Pay More

The progressive tax code means that marginal income taxes rise from 15% to 39.6% based on an increase of taxable income. For example, an individual earning $25,000 a year pays 15% in taxes. If the spouse earns an additional $25,000, those earnings are added onto household income and the couple moves into a higher tax bracket, paying 15% on roughly $18,000 of their income and 28% on the remainder that falls into the higher tax bracket. This could result in a marriage penalty of about $1,000.

Same Earnings, Different Result

Oddly, another couple with different circumstances may pay less tax on the same amount of income. If one spouse earns substantially more or less than the other, filing a joint tax return could prove advantageous. For example, a couple with one spouse earning $40,000 and the other working part-time and earning $10,000 will earn the same $50,000 as the couple described in the first example but will pay about $900 less in tax when filing jointly.

Unusual Transactions

Sometimes, an unusual transaction, such as the sale of a business or real estate, stock options or game winnings, will generate an increase in income to one spouse. When the couple's income exceeds a certain amount, which varies from year to year, an "alternative minimum tax" (AMT) kicks in and may raise the couple's tax liability. Filing separate returns could avoid this alternative tax.

Recap

Filing a joint tax return most often works to the advantage of married couples where one spouse earns substantially more than the other does. Couples who earn approximately the same amount of money could pay more taxes filing jointly. The IRS allows taxpayers to choose the option of filing jointly separately in order to lower the couple's overall tax liability.

References

• IRS: How Filing A Joint Tax Return Can Benefit You
• AllBusiness.com: Definition of Joint Tax Return

Resources

• National Center for Policy Analysis: The Marriage Penalty