Marriage Penalty Set to Return Should Washington Fail to Act Over 'Fiscal Cliff'
With the looming "fiscal cliff" crisis nearing on the first day of the New Year married, married couples are under the threat of being caught in limbo over proposed tax breaks that could expire as a result of inaction in Washington D.C.
Those specific tax provisions designed for married couples were created initially as a response to a perceived penalty that was levied on those who choose to file taxes jointly.
This came about because individuals filing taxes had a better standard deduction rate as opposed to their married counter parts.
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When President Bush passed his series of tax breaks, included in the package was a provision allowing the standard deduction of married couples to be increased to twice the amount individuals would pay.
If the Bush era tax cuts are allowed to expire that standard deduction limit would decrease for married couples, raising their taxes, thus facilitating a so-called "penalty."
Also as a result of inaction, many married couples would be put in to a higher tax bracket quicker due to a reduction in the income limit from $72,000 to $65,550, while individuals filing would not move into the 15 percent bracket until they amass an income greater than $36,250.
"… the standard deduction for a married couple filing jointly is 200 percent of the standard deduction available to a single taxpayer in 2012. Beginning next year, this amount is scheduled to drop back to only 167 percent of the single amount. On the other hand, couples where one spouse makes significantly more than the other may enjoy a tax benefit by filing jointly," Tom Cooney and Crystal Faulkner wrote as part of an advice column on NKY.com regarding the marriage penalty.
While the return of the marriage penalty is stark news for married couples there are numerous tax breaks, incentives and credits that are set to disappear which would affect the vast majority of the American public.
The real doubt remains in how this would be implemented over the coming year and the exact amount every American will have to pay should elected officials fail to act.
