Last updated: 2025-07-24
The Tax Cuts and Jobs Act of 2017 during the first Trump administration (henceforth, referred to as the TCJA) had a number of effects on the personal income tax code.
This might seem like a pointless post to write, seeing as on paper, the TCJA’s changes to the individual tax code are slated to expire at the end of next year, but I would be rather surprised if Congress does not prioritize renewing those provisions before then.
July 2025 update: many of these provisions have indeed been renewed, at least for now. There are very few changes in practice for moderately-highly-compensated salaried employees. Chief among them is the increase to the SALT cap to $40,000, phasing out between $500,000 and $600,000. Interestingly, since this now exceeds the standard deduction for both individuals and married couples, this introduces a new marriage penalty in certain situations.
One might also think that everyone already knows all of the relevant details by now, but I had a recent conversation that suggested otherwise.
I’m only going to cover the implications that I’ve experienced personally, so you’ll be disappointed if you wanted to read about how stock options interact with the Alternative Minimum Tax. The main points I want to cover here are the points that arose in that discussion: (1) the marriage penalty, and (2) RSUs.
Obligatory disclaimer: I am not a financial advisor (and even if I were, I am not your financial advisor). This post should not be construed as financial advice.
Colloquially, the term “marriage bonus” refers to the situation where by filing jointly, your tax obligations are reduced compared to filing separately as single filers1. Similarly, the term “marriage penalty” refers to the situation where your tax obligations are increased. I am not aware of states whose tax codes generate analogous asymmetries, but it’s not impossible.
As a result of the TCJA2, the marriage penalty does not exist for federal income tax if your joint income does not fall in the highest bracket (for 2024, this will be $751,601), as the joint filer bracket cutoffs are exactly double the cutoffs for single filers for all lower brackets.
Further, the marriage bonus does not exist for federal income tax if both individuals’ incomes fall in the same bracket.
Therefore, a simple rule of thumb is that if you have different marginal tax rates, and your joint income does not push you into the highest tax bracket for joint filers, then you should see a marriage bonus. If you have the same marginal tax rate and do not fall within the highest tax bracket for joint filers, then there will be no impact as far as individual taxes are concerned.
July 2025 update: this is not quite correct. Filing separately may allow one individual to claim the full SALT deduction, which for now has a high enough cap that it exceeds the standard deduction. Technically, it never captured all of the nuances, as there are situations where one spouse would have enough deductions to itemize, and the other spouse could either take the standard deduction, or file separately while also itemizing.
There are two further points that come to mind as I write this.
First, filing jointly remains advantageous past the highest bracket. One trivial example is the case of a single working spouse, as the joint brackets are all higher than the individual brackets; this exacl at situation continues to apply as long as the spouse with the lower income makes no more than $125,000 in 2024.
The phase-out gets rather complex, so I’d recommend plugging in numbers into a calculator if you don’t fit within one of the simple cases I outlined above, but I would not expect the marriage penalty to apply as long as the spouse with the lower income makes less than $200,000.
Second, there are other differences between filing jointly and filing
individually, so the tax brackets do not tell the full story. For instance,
if you normally itemize your deductions, the state and local tax (SALT)
deduction is capped at $10,000 $40,000 per tax return3, whether
filing as a single filer or jointly. Another example is that in
Massachusetts, we have a deduction for rent paid, which similarly does not
have different caps for individuals versus couples. Further, there are
income limits4 for various deductions that may no longer apply
upon getting married, e.g. student loan interest5.
Another consequence of the TCJA is that it set withholding for supplemental income at 22%6 7 by default (previously, it was 25%). Especially for workers in tech who receive restricted stock units (RSUs) which are classified as “bonus” income, this often represents drastic underwithholding and can lead to a surprise tax bill when April comes around, and often an additional penalty for underpayment of taxes if it causes the taxpayer to no longer fall within safe harbor8. I’ve heard from several coworkers who were slapped with a 5-figure tax bill in the aftermath of the TCJA, and an IRS penalty to add insult to injury.
Aside: the psychology of tax filing as I understand it is weird: people like seeing big tax refunds and dislike needing to pay more money, even if the prevailing wisdom is that tax refunds are akin to giving the government an interest-free loan, and needing to pay taxes when filing (provided that you fall within safe harbor) is akin to receiving an interest-free loan. As such, this change from the TCJA was exactly wrong from that psychological standpoint, even if it meant people received slightly more money in each paycheck. And, importantly, owing more taxes when filing does not actually say anything about how your overall tax burden has changed.
There are a few common workarounds that I’m aware of:
Make (at least) quarterly estimated payments to the IRS.
Play around with your W-4 withholdings.
Some companies and payroll systems allow individuals to fill out a form that authorizes the company to perform additional supplemental withholdings. This is the easiest option if available, since it’s set-and-forget, although specifying the “correct” number can take some effort. I personally use either 9 or 10%. (I can’t remember exactly which offhand, but it’s been good enough to push me into safe harbor.)
Short version: just do something that gets you back into safe harbor.
The federal tax brackets for “Married, filing separately” are strictly worse than remaining unmarried and filing as single filers. That said, I do not recommend lying to the IRS by filing as single filers if you are not actually single. ↩
Prior to the TCJA, the tax brackets actually started diverging much sooner. In 2017, the ceiling for the 25% bracket was $91,900 for a single filer but only $153,100 for joint filers. As such, the TCJA actually eliminated the marriage penalty for most filers. ↩
The SALT cap was one of the more contentious points of the TCJA, especially since it generally has more impact on filers in states with higher income and property taxes, which tend to be more Democratic (but are also home to several more moderate Republican members of Congress). In practice, the tax bracket changes and the increase to the standard deduction are such that filers generally come out ahead. In the past, I’ve created graphs to explore when the TCJA’s provisions actually would result in a higher overall tax burden, and my recollection is that it just didn’t happen in low-tax states, and that the cutoff was in the very high six digits or possibly low seven digits in all other cases I explored. Maybe someday I’ll try to recreate those graphs. ↩
Another notable income limit applies to direct Roth IRA contributions, but that’s more of a nuisance than anything, given the existence of the backdoor Roth strategy. ↩
This is actually a weird example because the income limit for joint filers is slightly more than twice the limit for single filers, but with sufficiently asymmetric incomes, you’re not going to be able to claim it anyways. ↩
If you receive more than $1,000,000 in supplemental wages in a given year, then you’re subject to a different, higher withholding rate, and this section does not apply to you. ↩
There is nothing in the tax code that explicitly authorizes companies to withhold an arbitrary different number, even if it would result in a more accurate result. As such, they generally go with the safe option. ↩
The IRS underpayment penalty generally does not apply if you paid either 90% of your actual tax obligations or more than 100% of your obligation for the previous year. ↩