When a Love Story Meets the Tax Code

The Cost of Combining Incomes

The Earned Income Tax Credit (EITC) is one of our country’s largest anti-poverty initiatives. The credit increases with every dollar workers make, up to a point, and then phases out as a household earns more.

But the EITC can also be a hidden poverty trap. When low-income people get married, the tax system unintentionally penalizes them for doing exactly what they should to escape poverty: working hard, combining resources, and building a stable home. 

Imagine two parents who want to marry each other. The woman makes $18,000 per year, and the man makes $30,000 per year.

As a single head of household tax filer with two kids, the woman qualifies for a much-needed $7,200 tax credit.

Her partner files single and doesn’t qualify for the EITC.

Together, unmarried, they use the $7,200 credit the woman gets at tax time to pay debts or cover expenses.

But if they marry, the tax system starts phasing out their credit based on their new $48,000 joint income, and it instantly drops to about $3,770.

The new spouses lose $3,430 overnight—almost a full month’s income—just because they made their relationship official. 

For some, this can be too much of a loss to risk.

The Life-Changing Power of Marriage and Family Stability

Marriage can lead to more happiness and satisfaction for couples—two incomes to cover the bills, a partner who shares the responsibilities, and the sense of well-being that comes from experiencing life with someone you love.

And kids who grow up in stable, two-parent homes are more likely to thrive in school, have better physical and mental health, and break cycles of generational poverty. 

But many low-income families aren’t getting to experience these benefits, and policies that discourage marriage—like the ones involving the EITC—are part of the reason why. 

Statistics confirm a decrease in marriages but also their importance for families.

• Just 50% of American adults are currently married, down from 69% in 1970. The number is even lower for people with less education and those who don’t identify as White.
• 63% of children live with two married parents. Again, that number drops for less-educated and non-White Americans.
• When married parents are compared to single parents with the same level of education, the poverty rate for a married person is 75% lower.
• Children raised by married parents are 82% less likely to live in poverty.

When it comes to Georgia:

• 54% of women and 49% of men are unmarried.
• 38% of children live in single-parent families.
• 18% of children (461,000 kids) live in poverty—the fifth highest number in the country.
• The state ranks 39th in the nation for overall child and family well-being.

Big cultural shifts have changed how many people think about marriage—and this plays a role in decisions not to marry. But the data shows that a stable, two-parent home still provides families with more financial security and opportunities for upward mobility. It’s also one of the most powerful solutions for lifting children out of poverty.

A Less Risky Path to “I Do”

A new study from the Georgia Center for Opportunity offers recommendations to make the EITC work better for low-income families. In particular, the federal government could adjust the maximum benefits and the eligibility limit for married couples. This would let new spouses combine their earnings without triggering an automatic loss of some or all of the credit. It would also remove a big barrier to building strong relationships and stable households.

Reforming the EITC won’t solve every challenge facing working-class families. But by restructuring the credit to reward partnership instead of penalizing it, the government can make sure that saying “I do” really is a celebration—a step toward a brighter future and a better quality of life for everyone in the family.

FAQs About the EITC

Additional Resources