Review of Economics of the Household

, Volume 1, Issue 3, pp 169–186

Shacking Up or Shelling Out: Income Taxes, Marriage, and Cohabitation

  • James Alm
  • Leslie A. Whittington

DOI: 10.1023/A:1025093300161

Cite this article as:
Alm, J. & Whittington, L.A. Review of Economics of the Household (2003) 1: 169. doi:10.1023/A:1025093300161


Anecdotal evidence suggests that the income tax penalty associated with marriage contributes to the decision of a couple to live together as a married vs. a cohabiting couple. In this paper, we use household data from the Panel Study on Income Dynamics to estimate the impact of various factors, including the federal individual income tax, on a couple's decision to marry instead of cohabit. We find that the initial decision to form either a cohabiting or a married union is only marginally affected by the income tax consequences of one form of union vs. another, and other factors play a more important role. However, for those already living together as a cohabiting couple, the decision to make the transition from a cohabiting to a married couple is significantly affected by the tax consequences of such a move. Here, an increase in the income tax at legal marriage, or an increase in the marginal tax rate with marriage, has a statistically significant and negative impact on the probability of transition from cohabitation to legal marriage. However, the magnitude of the tax impact is generally small, and several other variables are more important determinants.

marriage taxmarriage subsidyhazard model

Copyright information

© Kluwer Academic Publishers 2003

Authors and Affiliations

  • James Alm
    • 1
  • Leslie A. Whittington
    • 2
  1. 1.Andrew Young School of Policy StudiesGeorgia State UniversityUSA
  2. 2.Georgetown Public Policy InstituteGeorgetown UniversityUSA