Legal Definitions - singles' penalty

Definition: The singles' penalty, also known as the marriage bonus, is a tax term that refers to the difference between the reduced income-tax liability owed by a married couple filing a joint income-tax return and the greater amount they would have owed had they been single and filed individually.

Example: Let's say that John and Jane are married and file a joint tax return. Their combined income puts them in the 22% tax bracket, and they owe $10,000 in federal income tax. If they were single and filed separately, John would owe $6,000 and Jane would owe $4,000, for a total of $10,000. However, because they are married and filing jointly, they receive a tax break and only owe $8,000. This $2,000 difference is the singles' penalty.

Explanation: The example illustrates how a married couple can benefit from filing a joint tax return and receiving a tax break, which reduces their overall tax liability. However, if they were single and filed separately, they would owe more in taxes, resulting in a singles' penalty.