Have you heard about the federal marriage penalty? It exists whenever the tax on a married couple’s joint return is more than the combined taxes each spouse would pay if they each filed their own single or head of household return.

The tax is more on a joint return when the couple’s taxable income is pushed into a higher marginal tax bracket than would apply if the couple wasn’t married (so they pay a higher rate on the same total income than they would pay if each were single). And that usually happens where both spouses work and have relatively equal incomes.

For example, say that two taxpayers each earned (had taxable income of) $25,750 in 1999 (and assume double that or taxable income of $51,500 on a joint return). If they were married, their joint return tax would be $8,823.50. However, if they were single, each would owe $3,862.50, a total of $7,725.00. The marriage penalty is $1,098.50

The married couples pay more because they pay at a 28% rate on part of their income, while the single people both pay at a top rate of only 15%.

If you would like to find out more about the federal marriage penalty, contact Ellis & Associates, CPAs, P.A. for more information at (410) 256-9298.