An individual’s tax bracket depends in part on filing status, which loosely correlates with family structure. The three most frequently used statuses are: single, married filing jointly, and head of household. At times policymakers change the relationship between brackets, thus shifting the tax burden from one group of taxpayers to another based on family structure. In the last decades this was reflected in changes that addressed the “marriage tax penalty.” Federal legislation enacted in 2001 and permanently extended in 2013 restructured the standard deduction, some tax brackets, and a major tax credit to benefit married filers.
A married couple is generally treated as one tax unit who must pay tax on their total taxable income. A marriage tax penalty is said to exist when the combined tax liability of a married couple filing a joint return is greater than the sum of the tax liabilities the two individuals would have incurred were they not married. The combined income may place married taxpayers in a higher tax bracket than each of them would have faced if single. It is impossible to eliminate the marriage tax penalties within the existing tax structure without violating other desirable features of the tax system.
The opposite of the marriage tax penalty is a marriage tax bonus, with the couple paying lower income taxes than they would if they filed as individuals. Prior to the law changes in 2001, penalties and bonuses were about equally likely. Thereafter the likelihood and the size of marriage penalties greatly diminished, while the likelihood and the size of marriage bonuses for a large number of married taxpayers greatly increased.