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Will President Donald Trump Kill the Marriage Penalty?

By Matthew Frankel, CFP® – Updated Feb 23, 2017 at 7:47PM

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If President Trump and other Republican lawmakers get their way, the marriage penalty could become a thing of the past.

A cornerstone of President Donald Trump's campaign was tax reform. Specifically, Trump proposed the most radical simplification and overhaul of the U.S. tax code in many years. With a Republican majority in the House and Senate, whose tax-related positions aren't too far from Trump's, there's a realistic shot of getting it done. This can be especially welcome news for married couples, as part of Trump's plan calls for getting rid of the so-called "marriage penalty."

What is the marriage penalty?

In a nutshell, the U.S. tax brackets are set up create the so-called marriage penalty. Specifically, it might seem like the fair way to tax income would be one set of tax brackets for single taxpayers, and another set for married taxpayers that is exactly twice the single brackets.

As an example, single taxpayers who earn between $91,901 and $191,650 are currently in the 28% tax bracket. So, it might make sense for married taxpayers who earn between $183,802 and $383,300 would be taxed at the same rate, right? Well, the actual 28% tax bracket for married couples is significantly lower than that -- $153,101 through $233,350.

Young couple walking down the aisle after getting married.

Image source: Getty Images.

It's also important to mention that the tax brackets aren't the only form of marriage penalty in our tax code. For example, the child tax credit phases out at $75,000 of adjusted gross income (AGI) for singles and $110,000 for married couples, far less than twice the threshold for singles. In fact, there are several other ways married couples could be "penalized."

However, let's focus on the tax brackets. Most likely, if the marriage penalty was eliminated in the tax brackets, most other forms of the penalty would also disappear. For reference, here are the 2017 tax brackets for single taxpayers and married couples filing joint returns.

Tax Bracket

Income Range (Single)

Income Range (Married)

10%

$0-$9,325

$0-$18,650

15%

$9,326-$37,950

$18,651-$75,900

25%

$37,951-$91,900

$75,901-$153,100

28%

$91,901-$191,650

$153,101-$233,350

33%

$191,651-$416,700

$233,351-$416,700

35%

$416,701-$418,400

$416,701-$470,700

39.6%

$418,401 and above

$470,701 and above

Data Source: IRS.

Why it matters -- an example

The marriage penalty is best illustrated with an example. Let's say that an unmarried couple each earns a taxable income of $90,000. Under the current tax brackets, this would put each of them at the top end of the 25% tax bracket, and would result in federal income tax of $18,238.75 each, or a total of $36,477.50.

Now let's say that this same couple gets married, resulting in combined taxable income of $180,000. As you can see from the chart, this puts the couple well into the 28% tax bracket. According to these tax rates, the couple would now owe federal income tax of $37,284.

Suddenly, because the couple got married, their federal income tax goes up by more than $800. This is the marriage penalty in action.

And this may even be an understatement of the difference in taxes. If this couple has a child and remains unmarried, one of the parents would be entitled to file their return with head of household status, which has even more favorable tax brackets.

President Trump's proposal

As part of Trump's tax plan, the seven tax brackets that exist today would be consolidated into three. And as you can see in the chart below, the tax brackets for single filers would be exactly half of those for married joint filers.

Tax Rate

Married Filing Jointly

Single Filers

12%

Less than $75,000

Less than $37,500

25%

$75,000-$225,000

$37,500-$112,500

33%

More than $225,000

More than $112,500

Source: www.donaldjtrump.com (Note: These brackets were listed on the website during Trump's campaign, but may no longer be available on the website.)

The result of this would be that whether a couple got married or decided to stay unmarried, their federal income taxes wouldn't be affected. In our previous example, the couple would pay the same amount of federal income tax before and after their wedding, assuming their individual incomes remained the same.

In addition, notice that head of household filing status isn't listed in the chart. That's because President Trump wants to get rid of it as well.

Will it happen?

Since President Trump's tax plan and the congressional Republican platform differ in certain areas, there is no way to know what the final modifications to the tax code will look like. However, the opposition to the marriage penalty is unanimous. In fact, the GOP's platform specifically says, "We urge marriage penalties to be removed from the tax code and public assistance programs."

Because of this, I'd be very surprised if any tax reform package didn't eliminate the marriage penalty for U.S. taxpayers.

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