8 Government Programs That Quietly Penalize Married Couples
Tying the knot is a celebrated life milestone, but for many couples, it comes with an unexpected and unwelcome financial consequence: the marriage penalty. This penalty occurs when a household’s tax bill or eligibility for government benefits changes for the worse simply because two people get married.
While not intentional, the structure of many government programs is based on household income, meaning a dual income married couple is often treated less favorably than they would be as two single individuals. This quiet penalty can impact everything from your annual taxes to your ability to save for retirement or afford healthcare. Here are eight government programs where a marriage penalty can lurk.
1. Federal Income Tax Brackets
The most well-known marriage penalty is embedded within the federal income tax system. While many couples receive a “marriage bonus,” those with similar incomes are often penalized. This happens because the income thresholds for the married filing jointly tax brackets are not always double the thresholds for single filers. As a result, two individuals with relatively equal earnings can be pushed into a higher tax bracket once their incomes are combined on a joint return. This means they end up paying more in taxes than they would if they had remained single.
2. The Earned Income Tax Credit (EITC)
The Earned Income Tax Credit is a crucial benefit for low-to-moderate-income working individuals and families. However, it is a prime example of a program with a significant marriage penalty. The EITC is based on earned income and the number of qualifying children, with strict income phase-out ranges. When two low-income workers marry, their combined income can easily push them over the eligibility threshold, causing them to lose the credit entirely. This can result in a loss of thousands of dollars, creating a strong disincentive for marriage among the working poor.
3. Social Security Benefits
A lesser-known marriage penalty can affect Social Security benefits, particularly for dual-earner couples. While a lower-earning spouse can claim spousal benefits based on their partner’s work record, the rules can get complicated. Furthermore, the income thresholds for when Social Security benefits become taxable are not adjusted fairly for married couples. The income limit for married couples ($32,000) is not double the limit for single individuals ($25,000), meaning more of a married couple’s benefits are subject to taxation than if they were single.
4. Medicare Premiums
Higher-income retirees can also face a marriage penalty when it comes to Medicare premiums. The monthly premiums for Medicare Part B and Part D are subject to the Income-Related Monthly Adjustment Amount (IRMAA). This means that individuals with higher incomes pay more for their coverage. The income thresholds for these surcharges are another area where married couples are at a disadvantage. The threshold for couples is not simply double the single threshold, so two high-earning individuals can face higher Medicare premiums once they are married.
5. Affordable Care Act (ACA) Subsidies
Health insurance subsidies under the Affordable Care Act are designed to make coverage more affordable for those with lower incomes. These premium tax credits are based on a household’s income relative to the federal poverty line. When two individuals marry, their combined income is used to determine subsidy eligibility. This can easily push them into a higher income bracket, drastically reducing or even eliminating the subsidy they would have received as individuals. This marriage penalty can make affordable health insurance suddenly unaffordable.
6. Student Loan Repayment Plans (REPAYE/SAVE)
Income-driven repayment plans for federal student loans, like the SAVE plan (formerly REPAYE), calculate your monthly payment based on your discretionary income. If you are married and file your taxes jointly, your payment is based on your combined household income, even if your spouse has no student debt. While filing separately is an option on some plans, it can mean losing out on valuable tax deductions. This can force couples into a difficult choice between a lower student loan payment and a higher tax bill, a clear marriage penalty.
7. Medicaid Eligibility
Medicaid provides healthcare for millions of low-income Americans, and its eligibility rules are notoriously strict. The income and asset limits for Medicaid are another area where marriage can be financially detrimental. When two low-income individuals marry, their combined income and assets can easily disqualify them from the program. This is particularly devastating for individuals with disabilities or chronic health conditions who rely on Medicaid for essential, life-sustaining care. The fear of losing healthcare coverage is a powerful deterrent to marriage.
8. Supplemental Security Income (SSI)
Supplemental Security Income provides financial assistance to aged, blind, and disabled people with very limited income and resources. The program has one of the most severe marriage penalties in the federal system. The SSI benefit for a married couple is significantly less than what two single individuals would receive. Furthermore, the resource limit for a couple is only slightly higher than for a single person. This policy effectively penalizes some of the most vulnerable people in the country for getting married.
An Unintended Consequence of Policy
The marriage penalty is not a deliberate government conspiracy but rather a complex side effect of how social and tax programs are designed. These rules were often created decades ago with a single-earner household model in mind, which no longer reflects the reality for many American families. Addressing these penalties would require a significant overhaul of the tax code and social safety net. For now, couples must be aware of these potential pitfalls and carefully consider the financial implications before saying “I do.”
Have you or someone you know been affected by a marriage penalty? Share your experience in the comments.
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