What is the "marriage penalty," and does it still exist?

For many years, unmarried couples that lived together paid less in federal income tax -- often substantially less -- than did their married counterparts. This was especially true for higher-income couples. Compounding this so-called "marriage penalty" was the standard deduction, which disproportionately favored single people.

This discrepancy (why wasn't the married couple entitled to a standard deduction of $8,800?) didn't lead to an actual revolt by married taxpayers, but their vocal displeasure eventually brought about some changes. For 2004, the marriage penalty has largely been eliminated. Now, the standard deduction for married taxpayers is exactly twice that of single taxpayers. Lawmakers also widened the 15% tax bracket for married couples.

Some couples will still suffer the sting of a marriage penalty, but far fewer than in earlier years. You and your sweetie will probably not be in that category of sting-sufferers, because your incomes are not that high.

Unfortunately, this break is due to expire in 2005, at which time another -- less favorable -- relief provision kicks in. In the world of politics, no tax law is safe for long. Stay tuned.

When it comes to taxing Social Security, the marriage penalty is very much alive and well. Older married couples that have modest incomes and receive Social Security benefits must pay tax on their benefits if their "base amount" is more than $32,000. (The "base amount" is the married couple's combined adjusted gross income, as reported on their tax return, plus interest from tax-exempt investments, plus 50% of their combined Social Security benefits.) In contrast, each partner in an unmarried couple pays taxes on Social Security benefits only if his or her "base amount" is more than $25,000. That would mean that, as a couple, their base amount could be as high as $50,000 before they had to pay taxes on Social Security benefits.

Still, despite these potential pitfalls, make sure you do not overlook the abundance of other riches that can come with married life, like sharing the couch during Monday Night Football, and . . . what are the others?

If you want more information on tax rules relating to older people, see IRS Publication 554, Older Americans Tax Guide, available from the IRS at 800-829-1040 or at www.irs.gov.