A marriage penalty results when a married couple pay more taxes by filing jointly than they would pay if each spouse could file as a single person. A couple face the marriage penalty only when both spouses have earned income. Single-earner couples never pay a penalty and in fact always get a bonus from the Tax Code, paying less taxes than they would pay as singles.
Source of the Penalty: Progressive Tax Rates. The marriage penalty fundamentally results from progressivity of the Tax Code. Marginal income tax rates rise from 15 percent to 39.6 percent. The earnings of the secondary worker (the lower-paid spouse) in effect come on top of the primary earner's. Thus a secondary worker may find that his or her earnings push the couple's total income into a higher tax bracket, resulting in a marginal rate higher than the secondary worker would pay if taxed as a single.
To see how this works, consider a husband with taxable income of $25,000 per year. Under both the single and joint tax schedules, he would pay 15 percent tax on that income. However, if his wife also makes $25,000, only the first $17,350 of her income would be taxed at 15 percent. The remaining $7,650 of her income would be taxed at 28 percent, because it puts the couple's total income above the $42,350 ceiling for the 15 percent bracket. Thus the couple would pay 13 percent more tax on that income (the difference between 15 percent and 28 percent) than the wife would if she were single. This couple's marriage penalty would be $994 per year. married.