Marriage Penalty Relief for 2003-2004

A "marriage penalty" occurs when married taxpayers pay more tax than they would have as single taxpayers. The 2001 Tax Act included several provisions intended to reduce or eliminate various aspects of the marriage penalty. Two of the provisions increased the size of the 15% tax bracket for joint filers and the amount of the joint standard deduction to double the amounts for single filers. These are currently scheduled to occur in steps from 2005 to 2008. The following changes are effective for 2003 and 2004.

Expansion of the Married Filing Jointly 15% Tax Bracket
Using the 2003 Married Filing Jointly tax rate schedule, the 15% rate bracket ends at $56,800 ($28,400 x 2), rather than $47,450. Disregarding the reduction of the 27% rate to 25%, married taxpayers could pay up to $1,122 (($56,800 - $47,450) x (27%-15%)) less in taxes. Note: The Married Filing Jointly tax rates are used by Qualifying Widow(er)s and the Married Filing Separately brackets are half of the Married Filing Jointly brackets, so these taxpayers also benefit from this change.

Increase the Married Filing Jointly Standard Deduction
This provision makes the standard deduction on Married Filing Jointly returns twice the amount allowed for Single filers. This change was scheduled to be phased in over a five-year period beginning in 2005. For 2003, the new law increases the standard deduction from $7,950 to $9,500. This change primarily affects joint filers who do not itemize. However, many taxpayers may no longer need to file Schedule A because their itemized deductions do not exceed $9,500.

Our Advice
Now that the standard deduction for Married Filing Jointly taxpayers is double that of Single Filers, there's not as much of a need to worry about itemizing. (You should still keep good records, however!) Now, married couples may find that taking the standard deduction really pays off. It's simpler and may actually result in a bigger deduction.

Return to Tax Law Changes