Tax Administration

Income Tax Treatment of Married and Single Individuals Gao ID: GGD-96-175 September 3, 1996

This report provides information on income tax provisions in the Internal Revenue Service (IRS) Code that potentially create "marriage penalties" or "marriage bonuses" with respect to the tax liability of married couples. A marriage penalty results when two married persons have a greater tax liability than two similar single persons--that is, individuals with the same total income. Conversely, a marriage bonus results when a married couple owes less taxes than two similarly situated single persons. GAO (1) summarizes the current income tax provisions in the IRS Code whose applicability depends upon whether a taxpayer is married or single, (2) identified provisions likely to result in marriage penalties or bonuses, and (3) discusses the feasibility of quantifying the numbers of taxpayers affected by marriage penalties and bonuses.

GAO found that: (1) there are 59 provisions in the income tax code where tax liability depends at least partially on the taxpayer's marital status; (2) the provisions on the tax rate, the standard deduction, and the earned income credit are most commonly discussed in connection with marriage penalties and bonuses; (3) nine provisions, such as those on the tax rate and social security taxation, make some adjustment for the differences between joint and single income, but adjustments for married couples filing jointly are less than twice those allowed to single taxpayers; (4) those tax provisions limiting capital losses and the home mortgage interest deduction have only one limitation that applies equally to married and single taxpayers; (5) nine other provisions, such as those on the personal exemption, treat married couples as if they are single individuals or provide couples with twice the benefit allowed a single person; (6) 26 provisions treat a married couple as a unique, indivisible unit for tax purposes; (7) 56 of the 59 tax provisions could result in a marriage penalty or bonus depending on the taxpayer's individual circumstances; (8) the single most important factor that determines the provisions' effect on married couples is how income is divided between spouses; (9) couples with disparate incomes generally could enjoy a marriage bonus, while couples with equivalent incomes generally incur a marriage penalty; (10) other factors affecting couples' tax liability include which spouse owns property, has capital gains or losses, and is qualified for tax deductions and credits; and (11) the impact of marriage penalties and bonuses varies widely, both in terms of the number of taxpayers affected and the dollar amounts involved, but existing data is insufficient to quantify these numbers.

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