Some couples may face a ‘marriage penalty’ under Biden’s tax plan

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The wealthiest Americans may soon face a slew of tax hikes.

President Joe Biden wants to raise taxes on single filers likely with income over $452,700 and couples earning more than $509,300. 

But the plan may wind up penalizing some higher-earning married couples.

The marriage penalty

“It’s not the first time we’ve seen a marriage penalty,” said Sabina Smailhodzic Lewis, certified financial planner and co-owner at Avant-Garde Wealth in Bowling Green, Kentucky.

The so-called “marriage penalty” happens when couples pay more taxes together than individually. Couples earning similar incomes are more likely to be affected, according to the Tax Policy Center.    

“There’s a certain level that our government officials think is enough income per person or household,” Smailhodzic Lewis said. 

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Currently, the tax code separates single and married filers, with a top rate of 37% for individuals earning over $523,600 and couples making more than $628,300. 

Biden wants to increase the highest tax rate to 39.6%, impacting the “top 1%,” according to the White House plan outlined Wednesday. 

The proposal may still affect individuals making less than $400,000, however.

For example, let’s say each person makes $260,000. Under Biden’s plan, those couples may pay higher taxes filing together than on their own.

The measure would apply to fewer than 1% of families, the latest filing data from the IRS shows. But impacted couples may get a surprise at tax time, financial experts say.

“This creates a need for very specific analysis for married couples,” said Alvina Lo, New York-based chief wealth strategist at Wilmington Trust.  

Tax planning strategies

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