Marriage Penalty Relief

Beginning in 2005, the standard deduction for a married couple filing jointly is increased gradually to twice that for a single filer. The provision is fully phased in beginning in 2009.

Years	Standard Deduction for Married Couples Filing Jointly as Percentage of Standard Deduction for Single Filers
2001-2004	167%
2005	174%
2006	184%
2007	187%
2008	190%
2009-2010	200%
2011* and later	167%

* The Act sunsets.

Expanded 15% Rate Bracket

Beginning in 2005, the upper limit of the 15% income tax rate bracket for a married couple filing jointly is increased gradually to twice that for a single taxpayer. The provision is fully phased in by 2008.

Years	End Point of 15% Rate Bracket for Married Couples Filing Jointly as Percentage of End Point of 15% Rate Bracket for Single Taxpayers
2001-2004	167%
2005	180%
2006	187%
2007	193%
2008-2010	200%
2011* and later	167%

* The Act sunsets.

KPMG Observation

Married couples filing joint returns do not have to wait until 2005 for some relief because the upper limit of the new 10% income tax rate bracket is set at twice that for a single filer -- $12,000 for married couples filing jointly compared to $6,000 for single filers -- effective beginning in 2001.

Earned Income Credit (EIC) Modifications

The Act increases the beginning and ending points of the phase-out range for the refundable EIC for married couples filing a joint return by $1,000 in 2002-2004, by $2,000 in 2005-2007, and by $3,000 in 2008-2010. In addition to this partial marriage penalty relief, the Act makes several modifications to simplify and reform the EIC, consistent with the recommendations of the Joint Committee on Taxation. For example, the Act repeals the provision that reduces the EIC by the amount of an individual's alternative minimum tax. It also changes the base for the EIC from modified AGI to regular AGI. These provisions generally are effective beginning in 2002.