Marriage Penalty Relief

Married working couples have paid more taxes than they would have paid if both were single. The new law reduces this well-known marriage penalty. The marriage penalty is reduced by increasing the standard deduction and the size of the low 15% tax bracket for married couples to twice that of singles. However, this relief does not start until 2005 and takes four years to become fully effective. Married couples who claim itemized deduction instead of the standard deduction will not benefit fully. They will only benefit by the expansion of the 15% tax bracket. The expansion of the 15% tax bracket for married couples is increased, starting in 2005 to 174% of that for singles and eventually, by 2009 equals 200% of the tax bracket for singles. Expansion of the 15% rate will not impact those who currently are in the 15% bracket, that is, single taxpayers with taxable income of under $27,050 and married taxpayers with taxable income below the $45,200 level. Most taxpayers above the new 25% tax bracket will not be taking the standard deduction and therefore, will continue to be subject to the current marriage penalty.