There was a recent report published that said women are gaining on men based on income. This comes as good news for everyone. Even the IRS. The marriage penalty finds it's way onto your tax return when the incomes of two married people are similar... and as a couple, the bill is higher than their tax bills combined would have been had they stayed single.

This is complicated to explain, so hang in there.

The penalty is based on a community property laws enacted by several states to treat all income as though half was earned by each spouse. In the IRS manual, the defines the term community property: A spouse residing in a community property state is generally liable for income tax on one-half of the community income. In the 40's and the 50's, it was common for households to be supported by one income. The states that still have community property laws are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin.

When a two income family does earn relatively equal amounts of income, they tend to be pushed into a higher tax bracket as a result. This penalty effects 40% of all married tax payers. If one spouse earns a great deal more than the other, these filers can actually earn a bonus. Despite a 2001 tax law that helped low income earners, the penalty will be paid by an increasing number of filers in the years to come.

	Married Couple	Individual
AGI (Adjusted Gross Income)	$100,000	$50,000
Minus exemptions and standard deductions	-$12,500	-$6,950
Taxable income	$87,500	$43,050
Federal tax	$19,002	$8,766 ($17,532 for two individuals)
Marriage penalty	$1,470

The best way to avoid the p0ssibility of a marriage penalty without staying single and postponing marriage would be to maximize your pre-tax deductions such as contributions to your traditional IRA, 401(k), or similar type plan.

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