Marriage Penalty or Blessing

The US tax code has a few options for people in relationship to file taxes, for example, they can file separately as single individuals prior to marriage, and once married, they can file jointly or even separately as a married couple. After some analysis , it turns out the tax code is really incentivizing marriage in so many ways, so to all the singles out there, go get married (just kidding). 🙂

  1. Tax Schedule

You can easily find tax scheduled for different filing status on the internet. Attached are two screenshots from the 2022 Forbes. The more you earn, the more tax you will have to pay on those excessive income, “$xxx plus a higher percentage of the excess over…”

If we look at the tax visually, if we are given a flat tax rate, you should expect a straightline shooting from the bottom left to the top right, and the fact that the lines have different segments and they are curling to the top left is an indication that the marginal tax rate is getting higher and higher.

2. Calculate Single and Married Couple Tax

Now we have a good understanding of the tax, we can wrap all the different tax logic behind a function so for any given income, we can calculate the total tax required.

If we imagine a couple and both of them have income, we can simulate how much tax they will have to pay filing separately as singles (don’t get married for tax reasons, stay single) vs get married. We can even iterate through all different scenarios for every possible combination of a couple.

In the code above, the p1 and p2 columns represent different income for each people, tax_p1 and tax_p2 are the taxes they will need to pay file as singles. tax_p1p2_single and tax_p1p2_couple are the total different taxes they owe before and after marriage. In order to understand the numerical differences, we created two new columns. marriage_tax is the additional taxes the couples will have to pay. If you got the newly wedded tax penalty, the value will be positive, if you saved money, it will be negative. Also, the percentage column will represent the proportional difference.

3. Plot and Understand the Difference

After the difference columns are populated, we can plot the heatmap using seaborn.

Each axis represents one individual’s income situation. If you two make the same amount of money, you should be on the diagonal line from top left to bottom right. If there is one big earner and the other makes significantly less (like a stay at home dad or mom), you will be pushed away where the top and left most edge are extreme scenarios where there is only one earner in the relationship.

In the colorpicker below, blue means the percentage is really low, which indicates the marriage saves a lot of money tax wise. I created a mask to hide all the areas where there is no tax difference which is th empty area mostly on the diagnal and bottom right.

Some take aways:

  • a couple can save up to 30% of tax getting married instead of staying single. This happens when there is a big income gap between the two.
  • if there are two earners, and they are earning roughly the same amount, marriage doesn’t make a big difference
  • very likely, it doesn’t “hurt” to get married (except the small red triangle when a couple both earns around 300K)

Disclaimer, this article is absolutely NOT meant to provide any official tax, financial or relationship guidance.