The new law adds several
measures to alleviate the marriage penalty, but not until 2005.Marriage Penalty Relief
A married couple may file a joint tax return and be
treated as one taxpayer, so that taxes are paid on the couple’s total
taxable income. (While a married couple may file separate returns, this usually
results in higher taxes than filing jointly.) A “marriage penalty”
exists when the combined tax liability of a married couple filing jointly is
greater than the sum of their tax liabilities computed as though they were two
unmarried filers.
The new law adds several
measures to alleviate the marriage penalty, but not until 2005.
Standard Deduction Increase. The tax law allows individuals who do not itemize deductions to claim a standard deduction. The standard deduction available to single filers in 2001 is 60% of the standard deduction that can be claimed on a joint return. Thus, two unmarried persons have total standard deductions that exceed the standard deduction allowed to a married couple filing jointly.
The new law increases the basic standard deduction for joint filers to twice the basic standard deduction for an unmarried person filing a single return. The increase is phased in over five years, beginning in 2005, and is fully applicable in 2009 and later years.
Expansion of 15% Bracket. The new law increases the size of the 15% regular income-tax bracket for joint filers to twice the size of the corresponding 15% rate bracket for an unmarried person filing a single return. The increase is phased in over four years, starting in 2005.
The new law also makes adjustments to the earned income credit to provide additional marriage penalty relief for lower earners.
CWEB-L-114