Taxes After Marriage: How to Navigate the Confusing Consequences

These strange tax-law twists long have been known as the marriage penalty and the marriage bonus. They continue to exist in many cases and in widely varying degrees despite tax changes enacted in 2017 that included important relief for millions of married couples. Marriage penalties “generally occur when various tax provisions—exclusions, deductions, credits, and tax brackets—for married couples aren’t twice the comparable amounts for single filers,” say

Chenxi Lu

and

Janet Holtzblatt

on the Urban-Brookings Tax Policy Center website.

The penalty can be especially large for some high-income couples where each has large and roughly similar amounts of income, but it can also hit lower-income taxpayers. And many tax provisions can play a role in the size and extent of the penalty, says John Buchanan of Wolters Kluwer Tax & Accounting U.S. Here’s a look at some of them: 

Deductions and other factors

Tax brackets: The 37% federal income-tax bracket for married couples filing jointly isn’t twice as large as the bracket for singles, says

Stephen W. DeFilippis,

owner of DeFilippis Financial Group, a wealth management and tax firm in Wheaton, Ill., and also an enrolled agent, which means he is authorized to represent taxpayers at all levels at the IRS. For the 2022 tax year, the top federal income-tax rate of 37% applies to singles with incomes greater than $539,900. For married couples filing jointly, it applies with incomes greater than $647,850.  

Tax credit: Low-income workers may get hit by a marriage penalty because of the intricacies of the earned-income tax credit, or EITC, says Mr. DeFilippis. This complex provision was designed to help large numbers of lower-income workers and families. 

Net capital losses: With stock prices down so far this year, many investors may have larger realized capital losses than their realized capital gains. In that case, they typically can deduct as much as $3,000 a year of their net capital losses ($1,500 if married and filing separately) from wages and other income. That $3,000 limit is the same for singles and joint filers. Thus, two singles could deduct net capital losses of as much as $6,000, while joint filers are limited to as much as $3,000.

SALT deduction: For taxpayers who itemize their deductions, the maximum state and local tax (SALT) deduction is $10,000 for both joint filers and singles. So, two singles could deduct as much as $20,000, but joint filers are limited to $10,000. (For those married but filing separately, it’s $5,000 each.) This can be especially important for couples who itemize and live in high-tax areas, such as New York City, California and New Jersey.

Social Security: The base amount for calculating the taxation of Social Security benefits is $25,000 for unmarried taxpayers and $32,000 for married couples filing jointly, according to Mr. Buchanan of Wolters Kluwer.

Other zingers: The tax hit on married couples also can be affected by the limits on mortgage-interest deductions as well a 3.8% net investment income tax that applies to many upper-income investors. 

Location: Where you live can also play a role in how married couples are taxed, says

Janelle Fritts,

policy analyst at the Tax Foundation in Washington, D.C. Many states have marriage tax penalties embedded in their tax systems, she says. For more, see her report entitled: “Does Your State Have A Marriage Penalty?” 

Filing status

Married couples can choose to file jointly or as “married individuals filing separate returns” from their spouse. Most married couples file jointly because that’s usually more beneficial for tax purposes. Filing separately from your spouse may be beneficial in certain circumstances, including if one spouse has significantly lower income than the other and has very large medical-expense deductions. Filing separately also may be a smart move if you suspect your spouse is a tax cheat and you don’t want to be held responsible for that person’s taxes, says

Bryan Skarlatos

of the Kostelanetz LLP law firm in New York City.

How might a couple owe less because of marriage?

The answer again varies widely and depends on the details of each case. But one example would be a couple where one spouse has far more income than the other, or where one spouse took home all the income, Mr. Buchanan says. He offers this hypothetical example: Suppose one taxpayer has income this year of $170,000 and the other has $30,000. If married and filing jointly, they would owe about $3,800 less than they would if each had remained single, he says.

The bonus can be much larger in other cases, says Mr. DeFilippis. For example, consider a hypothetical case in which one person has $200,000 of wage income for this year and the other has zero. The marriage bonus would be about $10,550, he says. “Typically the more disparate the income between the two, the larger the marriage bonus,” he says.

Series I savings bond update: Treasury Series I savings bonds, which are government-guaranteed and offer important tax advantages, still look attractive even though the recently reset rate isn’t as high as it was previously. The Treasury recently announced that the initial annualized rate on new Series I savings bonds sold from November of this year to April 30 of next year is 6.89%. I wrote about this subject earlier this year. For more details, see the Treasury’s website.

Charitable-giving reminder: Stop procrastinating if you are thinking of taking advantage of a popular technique known as a qualified charitable distribution. Friends have reminded me that it can take more time to execute than you may think. In a typical case, an investor age 70½ or older can transfer as much as $100,000 a year directly from a traditional IRA to qualified charities without having to include the transfer as income. (Caution: Donor-advised funds aren’t considered qualified for this provision.) The transfer counts toward a taxpayer’s required minimum distribution for that year. Make sure the transfer goes directly to the charity, not the IRA owner, says

Eric Smith,

an IRS spokesman. The IRS recently issued a helpful summary on the subject.

Mr. Herman is a writer in California. He was formerly The Wall Street Journal’s Tax Report columnist. Send comments and tax questions to taxquestions@wsj.com.