From 1975 to 2005, the variance in incomes of American families with children increased by two-thirds. Labor market studies of the growth in inequality emphasize the rising pay of college graduates, while demographers study changes in family structure. We join these lines of research by viewing income inequality as the product of the distribution of earnings in the labor market and the pooling of incomes in families. We develop this framework with a decomposition of family income inequality using annual data from the March Current Population Survey. The analysis shows that educational inequalities in incomes and single parenthood contributed to income inequality, but these effects were offset by rising educational attainment and women’s employment. Most of the increase in family income inequality was due to increasing within group inequality that was widely shared across family types and levels of schooling.