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Marriage Tax penalty Could Return Next Year

Posted By on Dec 27th, 2012
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Marriage Tax penalty Could Return Next Year

Marriage Tax penalty Could Return Next Year

Fiscal Cliff May Bring Return of “Marriage Tax Penalty”

If the “Fiscal Cliff” is not averted by President Obama and House Republicans, the marriage penalty tax will return with a vengeance and will cost marriage couples who both work up to an additional $2,000 in taxes.

The marriage tax penalty is a politically sensitive tax and historically has brought political peril to how it is handled.

According to CNN, in 1992, then candidate Bill Clinton won election as president in part because he vowed to eliminate the marriage penalty tax.

When he broke his campaign promise during his first week in office, voters soured on him and awarded control of both chambers of Congress to the Republican Party the following mid-term election.

However, it wasn’t until George W. Bush took office that the IRS tax code that disfavors working couples was finally repealed. It is those same Bush tax cuts that will expire on January 1st that will bring back the tax.

The original marriage penalty tax gives a married couple a smaller deduction compared to two unmarried working people and forces the couple into a higher tax bracket sooner than if the couple were unmarried.

CNN explains:

While the standard deduction for single filers should rise to $6,100, married couples would receive a deduction of only $10,150 if lawmakers don’t extend the provision, according to estimates by the Tax Foundation. To erase the marriage penalty, it would have to be $12,200.

Married couples would also be moved into higher tax brackets more quickly. Individual taxpayers would be in the 15% tax bracket until they hit $36,250 in taxable income, but married filers could be pushed above it after only $60,550 in income, as opposed to $72,500.

Others say that when filling taxes as a couple, the return could beneficial depending on how much you and your spouse earn.

“… the standard deduction for a married couple filing jointly is 200 percent of the standard deduction available to a single taxpayer in 2012. Beginning next year, this amount is scheduled to drop back to only 167 percent of the single amount. On the other hand, couples where one spouse makes significantly more than the other may enjoy a tax benefit by filing jointly,” Tom Cooney and Crystal Faulkner wrote as part of an advice column on NKY.com regarding the marriage penalty.

With only four days remaining to the expiration of the Bush Tax Cuts, there has been no sign of a compromise by either party.






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