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The “marriage penalty” resulted in higher income taxes for a married couple, than for two similarly situated single individuals. This penalty had two components.
- First, there was a “standard deduction” disparity. Prior to the current tax law, the standard deduction for single taxpayers was $4,750. For two single individuals, their combined standard deductions were worth $9,500. However, if the same two individuals were married, their one “married” standard deduction was only $7,950. This meant that a married couple would have to pay taxes on $1,550 that they could avoid if they were not married.
- Second, there was a “tax bracket” disparity. Under the previous law, the 15% tax bracket for individuals applied to taxable income in excess of $6,000, but less than $28,400, which resulted in a 15% tax bracket with a “width” of $22,400. The 15% tax bracket for a married couple applied to income in excess of $12,000, but less than $47,450, which resulted in a 15% tax bracket with a “width” of $35,450.
This meant that two single individuals with could each have $22,400 (totaling $44,800) taxed in the 15% tax bracket, before moving up into the more “expensive” 27% (now 25%) tax bracket. If they got married, then only $35,450 would be taxed at 15% before moving into higher brackets. This current law changes this unfairness by making the 15% tax bracket for a married couple exactly twice the “width” of the 15% tax bracket for singles.
Don’t get too excited. The relief in the 15% tax bracket was initially for 2003 and 2004. In 2005, the marriage penalty increased because the width of the 15% bracket for married couples fell to 1.8 times the width for singles. Further, marriage penalty currently exists in significant amounts in the higher tax brackets, and that aspect of the marriage penalty is not addressed at all
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