Should My Wife and I get Divorced?

[baseballer95]

Just to start off, my wife and I are very happy and plan to stay together, however, being legally married is dramatically increasing our tax burden.

We currently live in Houston, TX and are renting. I am a consultant with an MBA making ~$140k annually. I have roughly $90k and 5 years left on my graduate school loans and am paying $1,700 monthly.

My wife just started her intern year in July and is making ~$55k annually ($27k in 2017). She has ~$250k in federal debt and another $100k in private loans. She is in income based repayment and is paying $450 a month on the Federal loans based upon 1/2 year of my salary. We are hoping for PSLF and plan to file separately for tax year 2017 to keep her required payment low.

If we were to be single filers:

• She would continue to have a low payment on her loans


• We would both be able to deduct our student loan interest payments


• I would have a much lower tax rate for my income


• I would be able to convert an older 401k to a Roth IRA at a much lower tax rate (28% vs 33%)

Would love to hear everyone's thoughts on both getting divorced as well as filing jointly vs. separately. I am happy to provide more info/context if there are any follow-up questions.

[Zaphod]

This is a terrible idea. Even fake divorce will bring out a lot of issues and ideas about commitment, especially when other people who dont buy your 'angle' start talking. No matter how strong you think you and her are, peoples opinions and constant talk will start to make an impact even on the strongest. Also, if anything gets rough in the future there is no reason for anyone to stick around, a super easy out. That will matter in the future, as rough times inevitably come.

I have a hard time believing theres a marriage penalty at that pay level, you wont really experience it until shes an attending.

[wideopenspaces]

So . . . I hear what you are saying. But in a few years she'll be an attending and the few thousand dollars you save from divorcing on paper will be a drop in the bucket. So financially I don't think it will matter in the long run.

I like to think of myself as being fiscally minded, as is my husband but seriously I would be very very unhappy if my husband suggested divorcing to save some money. Ultimately my marriage is not about money and I'd like to hope that yours isn't either. As zaphod mentioned, I think this whole divorcing on paper would impact y'all psychologically more than you realize which could adversely affect the relationship. Would not be worth the risk to me.

[jz]

When the bickering starts, there will be days when that piece of paper is the only thing holding you together.

[Vottomatic]

To love and to cherish,

to have and to hold,

until death do you part...

or until you can deduct another $1,500 from your taxes!

 

I almost hope this is a joke. Terrible idea on many levels. If my wife ever even mentioned this, I would seriously question her commitment to our relationship. Please move on, and I very much hope you haven't floated this idea to your wife yet! Besides, as others have said, the financial benefits would be minimal in the long run anyway, and aren't even quick, amicable divorces still pretty expensive?

[Peds]

did you ask her this already?

where did you put the ice pack afterwards?

 

good luck.

[PhysicianOnFIRE]

Of course you should get divorced.

Not only should you get divorced, but you should each then marry an individual with no earned income. There are numerous colleges and universities in Houston. Start hanging around the campus bars and I'm sure you'll both find willing partners. Just think of the expanded tax brackets when both you and your ex-wife can both file as married filing jointly!

If you file for divorce yet in 2017, you might even be able to structure it best so that alimony paid by the higher earner is tax-deductible! I believe this option goes away with the new tax code next year.

Yes, I'm being snarky.

Merry Christmas to you & your beloved!

-PoF

[The White Coat Investor]

The marriage penalty is significantly lower with the new tax bill.

But even if it wasn't, still a terrible idea. I actually get this question several times a year by email. I'm definitely a traditionalist on this topic, but just because something is a tradition doesn't mean it is bad.

Marriage is a personal decision with some financial ramifications not a financial decision with some personal ramifications.

[Lithium]

It's not just the tax system that imposes a marriage penalty.  There is plenty out there about couples divorcing so one can get affordable health insurance coverage (Medicaid).  That's easier to justify than doing it to save money on taxes.

But yeah, not something to consider when you're doing well already and just want to take home a few extra grand.

[StarTrekDoc]

Wow.... -smh

 

[Dicast]

If you get a divorce but live together, represent yourselves as married to others and hold property toget would you not be common law married? Does common law marriage mean you are required to file jointly?

[bean1970]

just a random con: you lose the unlimited spousal exemption for gifting. ie. you can't take your money, (15K next year) and pay her loans, on and on.

random con: employer benefits only eligible to spouse

[childay]

PhysicianOnFIRE wrote:

Of course you should get divorced.

Not only should you get divorced, but you should each then marry an individual with no earned income. There are numerous colleges and universities in Houston. Start hanging around the campus bars and I’m sure you’ll both find willing partners. Just think of the expanded tax brackets when both you and your ex-wife can both file as married filing jointly!

If you file for divorce yet in 2017, you might even be able to structure it best so that alimony paid by the higher earner is tax-deductible! I believe this option goes away with the new tax code next year.

Yes, I’m being snarky.

Merry Christmas to you & your beloved!

-PoF

Click to expand...

Be sure to also have some children with the new college-aged spouses so you can get a tax break!

[hightower]

jz wrote:

When the bickering starts, there will be days when that piece of paper is the only thing holding you together.

Click to expand...

hahaha, this made me laugh.  So true.  There will be days...I recently had one

[VagabondMD]

Don’t let the tax tail wag the marriage dog.