In just a few days, the country is at risk of falling off the fiscal cliff, a series of laws scheduled to change at midnight on December 31, 2012 that would affect tax cuts, tax breaks and spending cuts. One of the laws that will be affected will be the so-called marriage penalty, which would return if an agreement is not reached.
But what exactly is the marriage penalty? According to CNN, married couples receive a standard deduction that's twice that of individuals as part of the Bush tax cuts. The Bush tax cuts also double the income ranges for the 10 percent and 15 percent tax brackets, CNN explained. If an agreements isn't reached between President Obama and Congress, couples could see more than $2,000 in higher 2013 taxes.
In other words, if the fiscal cliff isn't addressed, married couples would receive a standard deduction of only $10,150 vs. the $6,100 if they filed as singles. If the penalty is removed, married couples get a standard deduction of $12,200, or twice that of a single person.
According to CNN, married couples would also be moved to higher tax brackets at quicker rates. Singles enter the 15 percent tax bracket after they reach $36,250 in taxable income, while married couples would enter the 15 percent tax bracket once they reached $60,550-not $72,500.
However, the marriage penalty has always been present for those in higher tax brackets above 15 percent and will continue to do so in the future. Whether or not the Bush tax cuts are extended, the 25 percent tax bracket would end at $87,850 for individual filers and $146,400 for joint filers, CNN reported.
Couples who benefit from the Earned Income Tax Cut will also be affected if an agreement isn't a reached.
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