The myth of the marriage penalty

By Liz Pulliam Weston

If you believe the myth about the marriage penalty -- the one that says you pay more taxes when you're married than if you'd stayed single -- you might be baffled by the whole gay marriage thing.

Why are gays and lesbians trying so hard to get hitched, you might ask, if marriage is so hard on the wallet?

The reality is that marriage has plenty of legal and financial benefits, including tax benefits. Even before Congress changed tax rules in 2001 to deal with the so-called marriage penalty, more married couples got a tax bonus from being married than paid a tax penalty:

• 51% of married couples paid less tax jointly than if they had not been married, according to a 1996 Congressional Budget Office analysis. The average amount these couples saved: $1,300.

• 42% of married taxpayers paid more by filing jointly than they would have if they'd remained single, the office said. The average penalty: $1,380.

The people who got tax breaks by marrying were those with disparate incomes, where one spouse earned more than the other. The wider the gap between the paychecks of the husband and wife, the bigger the bonus.

The people who tended to face a marriage penalty were those with similar incomes. Typically, the more they made, the bigger the penalty they paid.

Who's really penalized: The poor

The people who faced the most egregious penalties, as a portion of their income, were the working poor, according to tax expert Edward McCaffery, a law professor at the University of Southern California and the author of "Taxing Women." A husband and wife who each earned $10,000 could end up with a marriage penalty of more than $4,000.

Those low-income couples still face the potential for a tax penalty, said Mark Luscombe, a principal analyst for tax research firm CCH. That's because the earned-income credit, a tax break designed to keep the working poor out of poverty, can be less for a two-earner household than for singles.

• Talk back: How does your marital status affect your finances?

But Congress effectively eliminated the penalty for the majority of couples with its 2001 legislation, which has since been extended (but not made permanent; more on that in a minute). The standard deduction for married couples is now twice that for singles, and, for 2009, the 15% tax bracket has been widened for marrieds to $67,900, twice the limit for singles.

There's still a potential for an income-tax marriage penalty once joint incomes reach the 25% bracket, but the widening of the 15% tax bracket means that even those who pay a penalty will pay a less significant one than in the past.

The legislation eliminating the penalty for most couples is set to expire in 2010. Congress will be under plenty of pressure to make the change permanent, but that doesn't mean it will happen.

Continued: There are still financial benefits to marriage

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