OBBBA Includes 2 Marriage Penalties, 1 Neutral, and 1 Marriage Bonus

A marriage penalty exists in the tax system where, all things being the same, the taxes of two single individuals goes up when they get married. A marriage bonus occurs when combined tax liability goes down when two single people marry. And some provisions result in no change. Generally a couple will face a combination of marriage penalty and status quo provisions, but rarely a bonus provision - except under a new temporary OBBBA deduction but likely less than 15% of workers qualify for it (see below). In my examples, I'm assuming the individuals have identical tax situations and consider what happens if they marry. Thus, I'm looking at marriage penalty and bonus built into the tax law rather than built into facts, such as where a low-income individual marries a higher income individuals causing the higher income individual to drop to a lower tax bracket.

Examples of marriage penalty rules including two OBBBA items:

• Where the top 37% income tax bracket starts. At the brackets below this, the MFJ amounts are double the single rates. But at 37% - a rate that applies to less than 1% of individuals, the 37% rate starts at taxable income of $751,601 for MFJ and $626,351.
• The net investment income tax (NIIT) threshold for married is $250,000 and $200,000 for single.
• The maximum mortgage amount for an interest deduction is $750,000 if MFJ or single ($375,000 if MFS).
• The state and local income tax (SALT) cap which for 2018 through 2024 was $10,000 for both MFJ and single ($5,000 for MFS). This penalty remains after OBBBA but at a higher cap of $40,000 for 2025, subject to a phasedown starting at modified AGI of $500,001.
• OBBBA tip income deduction is $25,000 max whether married or single (generally $0 if MFS).
• OBBBA car loan interest deduction is $10,000 whether married or single (however most people won't have even close to $10,000 of interest expense which equates to a loan of about $160,000).

Examples of provisions with no change for marital status (including one OBBBA item):

• Individual tax rates and brackets at the 10, 12, 22, 24, 32 and 35% levels.
• The standard deduction for MFJ is double the single deduction.
• The gain exclusion for selling your principal residence is $250,000 if single and $500,000 if MFJ.
• OBBBA senior deduction is $6,000 per eligible senior (but $0 if MFS).

Examples of provisions with a bonus (I'm just aware of one and it is from OBBBA):

• OBBBA overtime income deduction - $12,500 if single, $25,000 if MFJ (generally $0 if MFS). This new deduction (Section 225) is not $12,500 per spouse. So, assuming that the married couple is below the phaseout level, if one spouse has overtime of $25,000 and the other has none, they get a $25,000 overtime income deduction. If that worker with the $25,000 overtime was instead single, they would only get a deduction of $12,500.

I can't think of other marriage bonus situations in the tax law.  If you know of others, please post them in the comments - thank you!

So, why was the OBBBA deduction for overtime income written differently for married couples than the tip income deduction? Drafting error? Purposeful?

What do you think?  Also see my chart below for a summary of four new OBBBA rules and relevance of marital status.