The Financial Consequences of Marriage for Cohabiting Couples with Children

Brief

The Financial Consequences of Marriage for Cohabiting Couples with Children

September 8, 2015

Abstract

Tax and transfer programs can create significant bonuses and penalties for low- and moderate-income cohabiters with children. We find that federal tax laws can create marriage penalties that reach almost 10 percent of earnings for our hypothetical couples earning $40,000 or $50,000 a year. In contrast, a prototypical couple earning $20,000 a year could receive a marriage bonus in excess of 10 percent of earnings. Because the transfer programs we consider largely treat cohabiting parents the same as married couples, they create neither significant marriage penalties nor bonuses; however, there may be instances in which couples are misclassified and receive transfer benefits as separate households when cohabiting which could lead to marriage penalties from those programs.

Cross-Center Initiative

Cross-Center Initiative: 
To reuse content from Urban Institute, visit copyright.com, search for the publications, choose from a list of licenses, and complete the transaction.

LATEST IN Children

To reuse content from Urban Institute, visit copyright.com, search for the publications, choose from a list of licenses, and complete the transaction.