The Marriage Penalty in the U.S. Tax System: A Closer Look at the “Big and Beautiful” Act

As we approach the changes outlined in the 2025 “Big and Beautiful” Act, it’s essential to examine the implications for taxpayers, particularly regarding the modifications to the SALT (State and Local Tax) deduction. One of the most striking changes is the increase in the SALT deduction limit from $10,000 to $40,000. While this might initially seem like a win for taxpayers, the details reveal a more complicated reality.

Understanding the Impact of the New SALT Deduction

Let’s break down a typical scenario to illustrate the potential pitfalls of this legislation:

• 📌 Two individuals each earning $300,000, totaling $600,000 in household income.
• 📌 Both reside in high-tax states like California or New York, where property taxes and state taxes can easily surpass $40,000 per person.
• 📌 If they remain unmarried and file their taxes separately, each one benefits from the full $40,000 SALT deduction.
• 📌 However, if they choose to marry and file a joint tax return, their income surpasses a phase-out threshold, and suddenly, their SALT deduction plummets to just $10,000.

The difference is staggering: $80,000 for single filers compared to only $10,000 for married couples. When factoring in a marginal tax rate of 35%, this shift could lead to an additional tax burden exceeding $24,500!

Technical Details of the New Tax Regulations

Here are some key technical details regarding the SALT deduction cap effective from 2025:

• SALT deduction limit of $40,000 applies starting in 2025.
• Phase-out begins for Modified Adjusted Gross Income (MAGI) exceeding $500,000.
• Phase-out ends at $600,000, after which the SALT deduction is fixed at $10,000.
• The limits for singles and those married filing jointly remain the same and do not adjust based on family size.

Conclusion: The Reality of Marriage Equality in Tax Law

Despite advances toward marriage equality in many aspects of life, the tax code may present a different narrative. For some high-income dual-career families, tying the knot could ironically lead to a higher marginal tax burden. With such notable discrepancies, it’s crucial for couples to consider the financial implications of marriage well ahead of their big day. #USA #Taxation #Trump

Understanding the nuances of tax legislation is key to making informed financial decisions that align with personal circumstances. As tax laws evolve, staying informed will help individuals and families navigate these changes effectively.