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Marriage benefits are more likely to surface when individuals with
disparate income amounts marry, while marriage penalties are more
likely to occur when two individuals with equal incomes marry.

do not apply (see the table “Scenario To summarize, Scenarios 1, 2, and 3 As to whether couples can rely for
4: Equal Incomes With Passthrough identify how marriage bonuses attribut- the long term on a provision that is
Effects”). able to the Sec. 199A QBI deduction scheduled to sunset on Dec. 31, 2025,
Scenario 4 returns to a situation could vary from pure marriage neu- it would seem highly unlikely that
where each partner makes the same trality to outcomes where significant Congress would allow the provision to
AGI (i.e., $125,000). Recall that the marriage incentives surfaced, depending expire if the corporate tax rate remains
TCJA modified tax rate tables were de- on the composition of the couple’s unchanged, as doing so would result in
signed to eliminate a marriage penalty finances. More specifically, Scenarios a tax increase on over 93% of business-
for couples earning similar incomes 2 and 3 emphasize ways in which the es. Any changes in the corporate tax
whose combined taxable income was SSTB limitations of Sec. 199A can be rates would more likely be accompa-
less than $400,000. On the surface, this effectively overcome for some unmar- nied by a corresponding change to the
is clearly the case in Scenario 4, except ried couples. Scenario 4, on the other QBI deduction percentage. Although
that Partner 1 has passthrough income hand, highlights a situation where the many couples may not over-rely on
that would qualify for a full Sec. 199A netting rules required in Sec. 199A re- forecast marriage bonuses/penalties as
QBI deduction if he or she filed single. sult in a significant marriage penalty. a major factor in determining whether
In this fact pattern, though, Partner 2 to legally marry or remain single,
has a passthrough loss that would re- Important area for tax being aware of the tax implications
duce his or her taxable income but does planning can be helpful. ■
not result in any adverse impact from As shown in the scenarios, much
Sec. 199A. This scenario highlights a potential planning when facing a mar-
situation where the “netting” rules of riage penalty or bonus depends on the Contributor
Sec. 199A result in a marriage penalty relative income of each partner and
John J. Masselli, CPA, Ph.D., is Haskell
for this couple because the QBI deduc- whether passthrough business income is
Taylor Professor of Taxation in the Rawls
tion would be eliminated when filing considered SSTB income. The scenar-
College of Business at Texas Tech
jointly. The couple would experience a ios nonetheless highlight some poten-
University in Lubbock, Texas. For more
marriage penalty of $3,599, all of which tially significant tax planning strategies
information about this article, contact
is attributable to the “netting” rules of for some unmarried couples whose fact
thetaxadviser@aicpa.org.
Sec. 199A. patterns resemble those presented.

AICPA RESOURCES

Article CPE self-study
Hagy, “Pitfalls and Treasures of the QBI Deduction,” Tax Staff Essentials, Level 4 — Tax Manager/Director
50 The Tax Adviser 727 (October 2019) Advanced Tax Planning S Corporations — Tax Staff
Essentials

For more information or to make a purchase, visit aicpa.org/cpe-learning or call the Institute at 888-777-7077.

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