Author Topic: Unmarried filed separately vs Married filed jointly?  (Read 3130 times)

sobezen

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Unmarried filed separately vs Married filed jointly?
« on: October 07, 2016, 11:15:40 PM »
Hi all!  I have a question to the mustachians who are married but file separately.  Can you share why you elected to do this versus filing jointly?  More importantly, what benefits if any, does electing to file separately offer compared to married file jointly?  I have a good friend who wants to continue to file separately with his fiance.  He told me he does not wish to get married on paper mainly because from a legal perspective there is no benefit.  Is he correct?  I am curious about the benefits and disadvantages too so I wanted to post this to the community.  Thank you in advance!
« Last Edit: October 08, 2016, 08:17:52 AM by sobezen »

MDM

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Re: Unmarried filed separately vs Married filed jointly?
« Reply #1 on: October 08, 2016, 09:04:43 PM »
Probably worth googling
  marriage tax penalty bonus
and looking at some of those links (also go to Images and click on some of those).

Some of these have been discussed here before, but I don't recall the specific thread(s) offhand.

Enigma

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Re: Unmarried filed separately vs Married filed jointly?
« Reply #2 on: October 20, 2016, 08:46:01 AM »
I believe tax programs tend to evaluate for you if it is better to file joint or separately based on all the information you put into the program.

Frugalman19

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Re: Unmarried filed separately vs Married filed jointly?
« Reply #3 on: October 26, 2016, 08:12:05 AM »
Being married can help your finances drastically, mostly for young people with little income. For example, when I was engaged to my wife, we decided to go to the court and get legally married on December 31st, because when I did my tax planning, being married saved us $7,000 in taxes. Mostly because she was unemployed at the time.

When both people are making decent money, it starts to go the other way, and thats where you hear about the marriage penalty. Married filing joint, is almost always better than married filing separately once the couple is already married. It is very rare for there to be an advantage to filing separately.

With This Herring

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Re: Unmarried filed separately vs Married filed jointly?
« Reply #4 on: October 26, 2016, 12:36:06 PM »
You will want to clarify which of these three filing status choices applies:
1) Married Filing Jointly
2) Married Filing Separately
3) Unmarried couple who each file as Single

#2 and #3 are NOT the same thing, tax-wise.  It is usually better to be Single than to file Married Filing Separately, but I'm sure there are exceptions.

For a married couple, the choice between #1 and #2 depends on a number of factors to determine which makes more sense financially.  If you are married to someone who you know is engaging in illegal activities and/or tax fraud, you might be best served filing Married Filing Separately no matter whether more taxes will be owed, as this can provide you some protection.

Laserjet3051

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Re: Unmarried filed separately vs Married filed jointly?
« Reply #5 on: October 26, 2016, 07:04:49 PM »
Hi all!  I have a question to the mustachians who are married but file separately.  Can you share why you elected to do this versus filing jointly?  More importantly, what benefits if any, does electing to file separately offer compared to married file jointly?  I have a good friend who wants to continue to file separately with his fiance.  He told me he does not wish to get married on paper mainly because from a legal perspective there is no benefit.  Is he correct?  I am curious about the benefits and disadvantages too so I wanted to post this to the community.  Thank you in advance!

If a spouse refuses or is unable to provide the necessary documentation to fill out a joint return, married filing separately is a good option. This happens more than you might think.

Goldielocks

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Re: Unmarried filed separately vs Married filed jointly?
« Reply #6 on: October 27, 2016, 09:18:18 PM »
Most of the replies have been about taxes. 

Also look into health insurance differences, division of assets upon split of relationship, will and estate planning implications, such as ability for the living partner to roll over retirement assets tax free upon the death of the other, to have a claim to remain in the home you are living in, even if another relative gets the capital value, etc.

Many of these can be managed with forms, legal advice, wills, etc., but are quite a bit more complex and don't default to what you may expect like they do if you were married.


moof

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Re: Unmarried filed separately vs Married filed jointly?
« Reply #7 on: October 28, 2016, 04:30:47 PM »
From a tax perspective, getting legally married is bad for your wallet.  If you have lower income it may be a wash, but definitely the higher income gets a significant marriage penalty.  Once married, there's really no difference between filing jointly and separately - in terms of the taxes owed.  Once your friend gets legally married, filing separately won't save him anything.

There are many more options open for couples staying single that allow you to optimize your taxes.  The drawbacks are minor and mostly can be resolved with a few legal docs / beneficiary forms.
I am very confused.  In my case at least we pay far lower taxes than if we were single and shacked up.  My wife is stay-at-home making $0, so being married moves up the tax brackets by about 2x compared to me being single and her freeloading on my couch, greatly lowering the federal taxes I would otherwise pay.  Not all the various deductions go up 2x, but all the important ones for us are at least close to 2x.

For 2 high earners making roughly equal money I could see some places like deductibility of traditional IRA contributions which are not 2x increased, but you sound like it is much more obvious difference.  Can you fill in some examples?

MDM

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Re: Unmarried filed separately vs Married filed jointly?
« Reply #8 on: October 28, 2016, 04:34:41 PM »
From a tax perspective, getting legally married is bad for your wallet.  If you have lower income it may be a wash, but definitely the higher income gets a significant marriage penalty.  Once married, there's really no difference between filing jointly and separately - in terms of the taxes owed.  Once your friend gets legally married, filing separately won't save him anything.

There are many more options open for couples staying single that allow you to optimize your taxes.  The drawbacks are minor and mostly can be resolved with a few legal docs / beneficiary forms.
I am very confused.  In my case at least we pay far lower taxes than if we were single and shacked up.  My wife is stay-at-home making $0, so being married moves up the tax brackets by about 2x compared to me being single and her freeloading on my couch, greatly lowering the federal taxes I would otherwise pay.  Not all the various deductions go up 2x, but all the important ones for us are at least close to 2x.

For 2 high earners making roughly equal money I could see some places like deductibility of traditional IRA contributions which are not 2x increased, but you sound like it is much more obvious difference.  Can you fill in some examples?

Tax-wise, getting married can be harmful or helpful.  See reply #1 in this thread.

sobezen

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Re: Unmarried filed separately vs Married filed jointly?
« Reply #9 on: October 28, 2016, 04:51:53 PM »
All excellent points, thank  you everyone.  Wondering can any Mustachians comment what is their experience if they are with a partner, but instead of signing a marriage certificate and filing your taxes as married filing separate or together, you chose to file single and separate?  Thanks in advance.  Looking forward to hearing your stories.

sobezen

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Re: Unmarried filed separately vs Married filed jointly?
« Reply #10 on: December 06, 2016, 12:40:10 PM »
Let me guess when.... :P

I checked in with my friend and he clarified he was not going to get married (no signed certificate) and did not want to file jointly.  Not sure if this helps but any other ideas you can share that might help is appreciated.  Personally I told him since you make less than her, why wouldn't you want to file jointly? To this he said, but by income changes and in the future it will be higher.  Also, he estimates that he will become the main income earner so he does not see any benefit from a tax filing perspective to file married and jointly.  Good grief. :D