Are you getting married around the end of the year? Usually, it doesn’t make sense to change your wedding date at the last minute. But be aware that you could be hit by the “marriage penalty” for a wedding in 2016 if you and your spouse have roughly the same amount of annual earnings.
Conversely, if one “significant other” has significantly more income than the other, you might cut your overall tax bill by getting married in 2016.
However, in yet another twist, if tax rates are lowered next year – as promised by President-elect Donald Trump – waiting until 2017 could reap tax rewards.
To understand how the marriage penalty works, you must look at the current tax rate structure. For starters, the income taxable to joint filers in the two lowest tax brackets of 10 percent and 15 percent is double the income for single taxpayers. For 2016, the upper threshold of taxable income is $37,650 for single filers and $75,300 for joint filers.
However, things begin to diverge for the tax brackets of 25 percent and above. In this case, the tax bracket covers more income for two single filers than it does for joint filers. For example, single filers in the 25 percent bracket can show a maximum total of $183,000 in 2016 (up to $91,500 each) before reaching the 28 percent bracket, while the upper limit for joint filers is only $151,900. And it goes on from there.
Absent circumstances that may affect their tax picture, some couples are typically hurt by filing jointly instead of as single filers, while others benefit.