Some British Monarchy enthusiasts here at the Tax Foundation have been watching the royal wedding closely. There has been some criticism in the UK over that fact that taxpayers funded part of the ceremony. We also began to wonder what personal tax implications there were for the happy couple. Would they pay more or less as a married couple? In the US there can sometimes be important tax changes that occur when a couple ties the knot. These are often referred to as "marriage bonuses" or "marriage penalties."
It turns out that there are basically no income tax implications for the royal couple, because in the UK everyone pays tax based on their individual income, whether they are married or single. There may be implications for inheritance taxes though, where the threshold for owing the tax is doubled for a married couple.
In the US income tax we file as 'single' if unmarried, and 'married filing jointly' (or 'married filing separately' in rare cases) when married. Singles and joint filers have different income tax brackets, tax benefits, and eligibility thresholds for benefits and other provisions, and the Alternative Minimum Tax can play a big role as well. Many times a couple will pay less filing together than they would have as single individuals; sometimes they might owe more. The Tax Policy Center has a blog post looking at how marriage can affect your tax liability depending on your circumstances. They summarize:
In many ways, the tax code is family friendly, offering tax benefits to married couples, particularly those with children. But credit phaseouts and the AMT can impose significant marriage penalties or, in the case of the AMT, generate bonuses.
Those issues are just one more compelling argument for comprehensive tax reform that simplifies the federal income tax.
Update: There could be marriage implications for the royal couple regarding capital gains. Now that they are married (and living together) any transfer of an asset between them will not incur a capital gains tax liability.
