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The Marriage Tax Penalty

Marriage and the IRS


Although millions of U.S. couples have been impacted by the marriage penalty in the federal tax code, do you understand what the marriage tax penalty is, how the marriage penalty came to be, and how changes in the federal tax law reduced the marriage penalty?

What is the Marriage Tax Penalty?

The difference between what you pay in taxes as a married couple and what you would pay as two single persons is often referred to as the marriage tax penalty.

Marriage Penalty Background

The marriage penalty aspect of the federal tax code was built into the federal tax tables. Higher taxes were required for a married couple who earned the same as two single individuals. It didn't make any difference if the married couple filed jointly or separately.

From 1913 to 1969, married couples had an advantage when it came to income taxes. However, because of the 1948 income-splitting tax-code which many thought was unfair to singles, the law was changed in 1969. The tax raise of 1993 made matters even worse for married couples. Married folks also took a hit by some targeted tax cuts enacted in 1997.

Prior to 2003, if both spouses earned about the same amount of money, then they ended up in a higher tax bracket and were penalized for being married. Actually, the smaller the difference between what they each earned, the higher the marriage penalty. However, if one spouse earned a good salary, and the other didn't, then they weren't penalized. The marriage penalty could affect couples in all income brackets, though. A couple who married could lose earned income tax credits that they had received as singles.

The Congressional Budget Office estimated that in 1996 the average marriage tax penalty was about $1,400 which adversely affected 42% of all married couples. Many believe that some couples chose not to marry because of the tax penalty.

2003 Tax Law Changes

In 2003 the Jobs and Growth Tax Relief Reconciliation Act of 2003 reduced the impact of the marriage penalty on married couples who choose to file jointly on their income taxes. This was done by equalizing the standard deduction for singles and married couples and increasing the end point of the 15 percent tax bracket for married couples filing jointly.

The marriage penalty still exists for some couples depending on their tax bracket.

Future of the Marriage Penalty

Depending on how Congress handles tax relief, the marriage penalty could be reinstated in 2010.

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