As if the process of getting married isn't complex and difficult enough, prospective spouses also need to take income tax considerations into account before tying the knot. That's particularly true for those who plan to marry late this year or early next year. As this article explains, from the federal income tax standpoint, those marrying next year may come out ahead by deferring or accelerating income, depending on their circumstances. Others would find it to their advantage to defer a year-end marriage until next year.
The amount of income subject to the two lower tax brackets (10% and 15%) for married taxpayers filing jointly is exactly twice as large as the amount of such income for single taxpayers. However, the tax brackets above 15% cover a larger total amount of income for two single taxpayers than for two taxpayers who are married.
Thus, there is a marriage penalty when married taxpayers' combined income will cause part of their income to be taxed at a rate above 25%, when none of their income would be taxed at a rate above 25% if they filed as single individuals.
A taxpayer's marital status for the entire year is determined as of Dec. 31. A taxpayer who gets married (or divorced) on that date is treated as if he were married (or single) all year long.
Marriage-penalty implications for year-end planning. Those eager to tie the knot as soon as possible should keep in mind that deferring the marriage until next year could save substantial tax dollars. And, where two unmarried taxpayers with substantially equal amounts of taxable income have solidified plans to marry next year, it may pay to accelerate income into this year rather than attempt to defer it until next year when married.
Marriage bonus implications for year-end planning. If only one of the prospective spouses has substantial income, marriage and the filing of a joint return will usually save taxes, thus resulting in a marriage bonus. In such a case, it will probably be better to defer income to next year if they will be married next year, or, if they are in the planning stage, to accelerate the marriage into this year if feasible.