The Marriage Penalty: When Two Earners Is Worse Than One

In a system like the United States' system, where the taxing authorities can treat the taxable unit as either a single person or a union of two people, there's always going to be some people that are penalized by marriage, and some people that benefit from it. Consider two couples, the Joneses and the Smiths:

Jan and Jamie Jones both worked in 2017. Jan earned $120,000 and Jamie earned $90,000. As single people, they each take their single exemption and standard deduction. Jan has taxable income of $109,600 and owes $23,670 in federal taxes. Jamie has taxable income of $79,600 and owes $15,645 in federal taxes. Total tax bill of $39,315. If they file jointly, their total taxable income is the same as if you added their taxable incomes as single people together: $189,200. You'd expect the same tax bill, but they actually owe more: John and Jamie now owe $39,860 as a married couple - a marriage penalty of nearly $600. It only gets worse as Jan and Jamie earn more. 

Compare them to Sam and Sage Smith. Sam earns $210,000 and Sage doesn't work. After taking an exemption and standard deduction, Sam has taxable income of $199,600 and owes $49,267 in federal taxes. As a single person, Sage has no taxable income and owes $0. She can't do anything with her exemption and deduction, and they have a total tax bill equal to Sam's tax bill as a single person. But if they're married filing jointly, then Sam is able to take Sage's exemption and standard deduction, and their joint taxable income is now reduced to $189,200 (same as Jan and Jamie), and their tax bill is now the same as Jan and Jamie's: $39,860, a savings of nearly $10,000.

All in all, the US tax code tends to favor couples where there is an extreme disparity in earnings compared to their equal-earning peers, and also favors lower-income couples compared to two lower-income singles. This means that the most penalized group is going to be two very-high earners that make roughly equal amounts: If Jan and Jamie had each made $250,000, the marriage penalty would have been nearly $10,000.

Now this doesn't mean that you should get married or not get married (or file separately) because of the tax implications. There are plenty of other tax implications to getting married (for example, the ability to double the tax-free capital gains on the sale of your home) or of choosing to file separately (for example, inability to take education credits or the credit for child and dependent care). And hopefully you didn't need me to tell you this, but there are non-tax implications to getting married too.

One thing you definitely should do though, if you're married, is make sure that your federal withholding is right. That means reading through the instructions on the IRS's Form W-4, working through the two-earners/multiple jobs worksheet with your spouse, and filing a new W-4 with your employer requesting additional withholding if that's what the worksheet suggests you should do. Even if it means slightly less in your paychecks now, you'll be happy you don't have a massive tax bill at the end of the year.