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The
2003 Tax Act (Jobs and Growth Tax Relief Reconciliation Act of 2003 -
JGTRRA)
was signed into law by President Bush on May 28, 2003, followed more
recently
by the Working Families Tax Relief Act of 2004 (WFTRA), which was
signed
into law on October 4, 2004.
As
is typical of recent tax legislation, the 2003 and 2004 Tax Acts
offered
tax relief to individuals, but did so through a variety of complex
provisions
that included retroactive, temporary and phased-in/phased-out effective
dates. While some of these provisions may not apply to you, other
provisions will and you may want to revise your planning to take full
benefit
of those provisions.
Today's topic
is marriage penalty relief. If you would like additional
information
on this topic, please call my office.
Accelerated Marriage
Penalty Relief - Standard Deduction Increase
The
standard deduction for married couples was increased by JGTRRA to
double
the amount of the standard deduction for single taxpayers
- from $7,950 to $9,500 - but only for
2003
and 2004. The Working Families Tax
Relief
Act of 2004, however, extended the double
standard deduction for married couples through 2010.
In 2011, EGTRRA sunsets and the standard deduction reverts to a
statutory
dollar amount.
|
Joint
Filer Standard Deduction (as a % of single filer standard deduction
amount)
|
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2002
|
2003
- 2010
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2011
and later
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Not applicable
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200%
|
Not applicable
|
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Planning
Notes:
| 1. |
In 2006, the standard deduction
for married couples filing jointly is $10,300; $5,150 for single
filers.. |
| 2. |
The increase in the standard
deduction for married couples may influence whether to itemize
deductions
or take the standard deduction. Since some states with a state
income
tax allow itemizing for state income tax purposes only when itemizing
for
federal income tax purposes, additional analysis may be required to
determine
whether itemization or the standard deduction will provide the best
overall
tax results in those states. |
| 3. |
The higher standard deduction
may require more married couples to pay alternative minimum tax (AMT). |
Accelerated Marriage
Penalty Relief - 15% Tax Bracket Increase
JGTRRA
increased the "width" of the 15% tax bracket for married couples to
twice
that for single taxpayers...again in 2003
and 2004 only. The Working Families
Tax Relief Act of 2004, however, extended the double "width" of the 15%
tax bracket for married couples through
2010.
When the Economic Growth and Tax Relief Reconciliation Act of 2001
sunsets
in 2011, the 15% tax bracket amounts will again revert to statutory
dollar
amounts.
|
Joint
Filer 15% Tax Bracket Size (as a % of single filer 15% tax bracket)
|
|
2002
|
2003
- 2010
|
2011
and later
|
|
Not applicable
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200%
|
Not applicable
|
|
Planning
Notes:
| 1. |
In 2006, the 15% tax bracket
for married couples filing jointly applies to taxable income greater
than
$15,100 and equal to or less than $61,300. |
| 2. |
For married couples who
continue to itemize deductions and, as a result, don't benefit from the
increase in the standard deduction, the 15% tax bracket expansion will
provide them with some marriage penalty tax relief. |
| 3. |
The expanded 15% tax bracket
may require more married couples to pay alternative minimum tax (AMT). |
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