A marriage penalty is when a household owes more in taxes due to a couple marrying and filing jointly.
New York is one of sixteen states to have a marriage penalty in its individual income taxes due to the way its tax brackets are organized.
Are my spouse and I penalized for filing jointly?
According to the Tax Foundation, a marriage tax penalty exists when “a state’s income brackets for married taxpayers filing jointly are less than double the bracket widths that apply to single filers.”
This scenario typically occurs when two married people with similar incomes file jointly. It applies to high-income and low-income couples.
The Tax Foundation’s Janelle Fritts reports that owners of ‘pass-through’ businesses, or those not subject to corporate income tax, are most affected by this non-neutral taxation.
If an owner of a pass-through business files their business income under the individual tax system, they’re left paying more in taxes on their business income than they otherwise would.
More: Tax Refunds: The question that never seems to be answered “Where’s my refund?”
Should married couples file separately?
Those looking to avoid the marriage tax penalty may opt to file separately, but doing so comes with its own disadvantages.
“It either disallows or reduces the value of deductions and credits available to the family jointly,” wrote Fritts.
Filing separately on the same return provides a solution to this problem, continued Fritts, though the process is “slightly more complex than doubling tax brackets for joint filers so that there is no penalty for filing jointly.”