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To remain married or divorce?

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  • conniebird
    replied
    Seems like getting divorced to avoid taxes alone not worth it. Delaying marriage is a must better strategy (what we are doing).

    Leave a comment:


  • Craigy
    replied
    If the code doesn't change soon, we will personally get slapped with the marriage penalty.    :x

    Echoing other comments, wait for the new Trump tax plan which will hopefully get rid of the marriage penalty.  The proposed plan I saw awhile back essentially gets rid of the marriage penalty by doubling the bracket size.  We'll see if it comes to fruition.

    For some marriage is only a legal construct.  Tax wise, that's exactly what it is.  For many others, and historically for everyone, it's a religious commitment as well.  These days that's generally not tied to the state.  Therefore you can get a legal divorce but still be married in the eyes of God.  Whether or not the great state of Michigan or Alabama or Nevada says I'm married makes no difference to my happiness.   :P

    If you're paying an extra couple few grand a year because of the marriage penalty, you tend to just bend over and take it, resent the government a little bit more and go on with your life.  Once you're staring at $20k or $30k a year though (especially when you factor state tax), that's when you have to decide if it's really worth it or not.  Chances are, you're both going to have earned your own max Social Security benefit.  Socially fewer people really care these days if you're married or not.  Most states no longer call your kids bastards for being unwed.   

    Leave a comment:


  • Craigy
    replied




    As above, tax code will change soon (http://taxfoundation.org/blog/how-would-trump-and-clinton-tax-plans-affect-your-taxes), and then it will undoubtedly change again later.

    Forgive me if I’m out of line, but you aren’t seriously considering divorce to optimize your tax status, are you? Did you decide to marry to lower your taxes, or was there some other reason?

    Money is a surrogate endpoint. Don’t make love, happiness, fulfillment and the real stuff of life subordinate to a few extra dollars when you already have an abundance.
    Click to expand...


    Why the ************************ not?




    What happens when one of you decides to retire early or stay home with the kids? With one income, there’s a tax benefit to being married. Do you get re-married then? Divorce again when the kids are out of the house and you’re both working again? Re-re-marry when retired?

    There have been somewhat similar threads about delaying marriage here and here.
    Click to expand...


    Sure, why not?  There was actually a good tax court case where an older couple in Florida was getting divorced end of every December, remarrying every January since they saved enough in taxes to make it worthwhile.  IRS shut them down though.

     

     

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  • PhysicianOnFIRE
    replied
    What happens when one of you decides to retire early or stay home with the kids? With one income, there's a tax benefit to being married. Do you get re-married then? Divorce again when the kids are out of the house and you're both working again? Re-re-marry when retired?

    There have been somewhat similar threads about delaying marriage here and here.

    Leave a comment:


  • Kamban
    replied


    Forgive me if I’m out of line, but you aren’t seriously considering divorce to optimize your tax status, are you? Did you decide to marry to lower your taxes, or was there some other reason? Money is a surrogate endpoint. Don’t make love, happiness, fulfillment and the real stuff of life subordinate to a few extra dollars when you already have an abundance.
    Click to expand...


    Well said. By divorcing for money the OP might end up with neither love, life or money in the long run. Happiness with what you have is more important that extra 18-30K per year, especially if one earns >$500K combined.

    Leave a comment:


  • willpmd
    replied
    http://www.nytimes.com/interactive/2015/04/16/upshot/marriage-penalty-couples-income.html?_r=0

    Leave a comment:


  • Lithium
    replied
    The highest marriage penalty I can come up with using this calculator is approximately $36,000.00:

    http://www.taxpolicycenter.org/interactive-tools/marriage-bonus-and-penalty-tax-calculator

    Which is still astronomical.

    Multiply that by the life of a career, and you're talking over $1,000,000.00 in earnings that could otherwise have been invested and compounded to several times that amount.  That can go to a couple's retirement, their children's education, and to charity.

    Think of it this way:  If you had not gotten legally married in the first place, and wanted to make a personal commitment to your partner, would you sacrifice $3-5 million to do so through the legal system?  If not, and you had already done so, why would you not try to reverse the mistake (if your partner is willing and before any financial or emotional damage is done)?

    Leave a comment:


  • jfoxcpacfp
    replied
    Sure, you can lower your overall taxes by divorcing, but, if we look at this in pure black and white (not considering the social implications), married couples also enjoy advantages such as unlimited gifting to your spouse, the ability to inherit an IRA and treat it as the survivor's own, having access to each spouse's benefit plans, and more that my early morning brain hasn't come up with. Marriage, imho, is a personal commitment, not a financial decision.

    Leave a comment:


  • cozmopak
    replied
    If a single piece of paper, the marriage certificate, is preventing us, as a couple, from earning and additional 40k per year that could go toward our retirement, it seems illogical to retain that piece of paper. Our marriage is not defined by the government. Especially since it seems like the government penalizes dual income couples with substantial salaries.

    Leave a comment:


  • CM
    replied
    As above, tax code will change soon (http://taxfoundation.org/blog/how-would-trump-and-clinton-tax-plans-affect-your-taxes), and then it will undoubtedly change again later.

    Forgive me if I'm out of line, but you aren't seriously considering divorce to optimize your tax status, are you? Did you decide to marry to lower your taxes, or was there some other reason?

    Money is a surrogate endpoint. Don't make love, happiness, fulfillment and the real stuff of life subordinate to a few extra dollars when you already have an abundance.

    Leave a comment:


  • jz
    replied
    @cozmopak,   Wait for the new tax codes via President Trump & GOP before any rash divorce.  Your concerns are real,  unfortunately.   My husband and I have paid an extra $25k- $30k annually for the status of being  married.  President Trump has stated he will abolish the marriage penalty.

    Same penalty at the low end of income;  a couple  jointly earning $17,000 pay a 17% penalty over remaining single. Kids grow up fatherless , in part because our tax code is an assault to the nuclear family.

    Leave a comment:


  • DMFA
    replied
    It can be a bit complicated, but it can effect the 150-415k range. The Wikipedia article seems to explain it quite well:
    https://en.wikipedia.org/wiki/Alternative_minimum_tax

    Leave a comment:


  • cozmopak
    replied
    When does AMT start to kick in?

    Leave a comment:


  • DMFA
    replied
    Especially if you meet AMT by filing jointly and don't by filing separately, yes, there are benefits at least to file as things other than MFJ.

    Now, in order to preserve things which are otherwise granted to married couples, you would need to create a layer of legal contracts to create the equivalent situation of being married, and I'm not sure you can completely cover all the bases vis-à-vis children, etc. But I do know of a few people (without knowing *all* their specifics) who eschew legal marriage in order to minimize tax burden. This is basically what same-sex couples have done up until recently...

    Leave a comment:


  • cozmopak
    started a topic To remain married or divorce?

    To remain married or divorce?

    My wife and I are both physicians.  We're fresh out of training and haven't yet realized our full income potential, but once we do, it will be high.  I've been running some calculations on various tax software and it seems that once you reach a certain number, it actually pays to get divorced.  Does anyone have experience with this?
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