Over time, the IRS and Congress have created and enforced various inconsistencies in the tax treatment of single versus married persons. Under the most recent tax law changes, we see equal treatment in the form of the new standard deduction, with single persons receiving a $12,000 deduction and married persons jointly receiving exactly double the amount, $24,000. That seems fair with each individual taxpayer effectively entitled to the same standard deduction.
However, it does not take long to find where the law is startlingly unequal, with the result that a great planning opportunity arises for those who are not married. This is the new SALT deduction limitation of $10,000, which deductible amount applies equally whether the taxpayer is single or married. That is, while a single individual can claim up to a $10,000 deduction for state taxes paid, married individuals effectively receive only a $5,000 deduction apiece for a maximum combined total deduction of $10,000. This can be a real penalty for married couples in higher tax states.
The planning opportunity for unmarried couples lies in the higher earning spouse claiming the full state tax deduction limitation based on, say, income and property taxes and stacking on any mortgage interest paid, together with any charitable gifts or other remaining allowable deductions. In many cases, this will far exceed the smaller standard deduction of $12,000 available to a single person. The unmarried partner, absent any significant additional deductions beyond the SALT limitation, would claim the standard deduction. The net impact would allow the unmarried couple, filing separate tax returns, to claim far more in total deductions than the $24,000 standard deduction available to a married couple who would not be able to take advantage of itemized deductions given their marital status.
One approach that has been suggested for married couples facing this new penalty is to combine deductions into one tax year to the extent possible so as to successfully itemize one year and take the standard deduction the next. There exists some uncertainty as to whether the IRS will permit this approach to be fully effective given the requisites of payment of a fixed obligation and appropriate timing. This seems to be far less effective than simply not getting married if, after all, taxes are that important to you.