Author Topic: Should we get married before year end? Tax q's  (Read 5340 times)

miskomd

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Should we get married before year end? Tax q's
« on: December 06, 2014, 11:35:45 AM »
I recently got engaged - we have a wedding/party date set for June, 2016 but are thinking that it may make sense to get legally married before the end of 2014 for tax reasons.

(living in Texas, if it makes any difference)
Me: take home pay of roughly 44k/year, about 2k remaining in low interest rate student loans, 90k house mortgage. Extremely stable job with pay gradually increasing yearly (teacher). Very low monthly expenses.

Fiance: graduate student finishing school in May, 2015, upon which she will have a job that could range from 25k to 35k starting salary, starting June, 2015 at the earliest. No debts whatsoever. She made less than 10k take home in 2014 from an assistantship through graduate school.

If I understand correctly, I am currently in the 3rd level of the tax bracket and she would be in the second (for 2014). Am I right that filing jointly would move us both into the 2nd level, therefor substantially increasing the potential tax refund? It seems like a good chance that this would also be the case in 2015.

Please respond based on the financial implications exclusively, the relationship is not up for questioning. She's an excellent partner...a fellow Mustachian after all!

Thanks!

Paul der Krake

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Re: Should we get married before year end? Tax q's
« Reply #1 on: December 06, 2014, 11:53:18 AM »
The tax bracket is only part of the answer, there are other things she is eligible for with her current low income that you may not be eligible for as a married couple, like the savers credit.

Why not just run the numbers for both scenarios? It will take you less than a couple hours if all you have is two 1040s. If you've never done taxes by hand, now is the perfect time to learn!

Calvawt

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Re: Should we get married before year end? Tax q's
« Reply #2 on: December 06, 2014, 11:54:59 AM »
I think if she has little to no income like you said, I agree moving to the married tax brackets would probably result in a bigger refund.  That being said, you would now have to share it with her!

Like Paul mentioned, be sure to run the numbers for some of the other low income credits she might lose.

pagoconcheques

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Re: Should we get married before year end? Tax q's
« Reply #3 on: December 06, 2014, 01:17:53 PM »
You'll probably save more money by having a quick wedding (much smaller or just swing by the courthouse one afternoon) than spending whatever it will cost to stage a presumably bigger and more formal wedding in June. 

johnny847

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Re: Should we get married before year end? Tax q's
« Reply #4 on: December 06, 2014, 01:33:01 PM »
If I understand correctly, I am currently in the 3rd level of the tax bracket and she would be in the second (for 2014). Am I right that filing jointly would move us both into the 2nd level, therefor substantially increasing the potential tax refund? It seems like a good chance that this would also be the case in 2015.
Incorrect. You really should just try running the numbers. Run them, and you will find that your fiance will owe nothing in taxes for this year (so long as she cannot be claimed as a dependent on somebody else's tax return - that is, she provided at least half of her support). And you are in the 15% bracket, which is not the 3rd level of brackets, unless you count the de fact 0% bracket as a bracket. I'm guessing you're not, though, because I can tell you misunderstand how the standard deduction and exemption affect your taxes.
I don't know how much your mortgage interest is, but it is possible that as a single person you will be able to get the tax deduction, but as a married couple, you will not (because the standard deduction is 6200 vs 12400 for a married couple).

The tax bracket is only part of the answer, there are other things she is eligible for with her current low income that you may not be eligible for as a married couple, like the savers credit.
Students are ineligible to receive the saver's credit.

Paul der Krake

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Re: Should we get married before year end? Tax q's
« Reply #5 on: December 06, 2014, 01:38:06 PM »
The tax bracket is only part of the answer, there are other things she is eligible for with her current low income that you may not be eligible for as a married couple, like the savers credit.
Students are ineligible to receive the saver's credit.
Good point. That's the only one I could think of because it's the only one I was eligible for back from when I was "poor".

forummm

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Re: Should we get married before year end? Tax q's
« Reply #6 on: December 06, 2014, 03:23:00 PM »
FWIW, and I know you asked only for financial responses, but I would resist the temptation to get married in the next few weeks just to save on taxes. I know you're engaged, and the relationship is solid, but a big move like that doesn't need to be rushed into, especially since you were planning to wait another 18 months. If you spend some time really thinking about it, you could always get married anytime next year if you don't want to wait until 2016.

miskomd

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Re: Should we get married before year end? Tax q's
« Reply #7 on: December 07, 2014, 06:57:35 PM »
If I understand correctly, I am currently in the 3rd level of the tax bracket and she would be in the second (for 2014). Am I right that filing jointly would move us both into the 2nd level, therefor substantially increasing the potential tax refund? It seems like a good chance that this would also be the case in 2015.
Incorrect. You really should just try running the numbers. Run them, and you will find that your fiance will owe nothing in taxes for this year (so long as she cannot be claimed as a dependent on somebody else's tax return - that is, she provided at least half of her support). And you are in the 15% bracket, which is not the 3rd level of brackets, unless you count the de fact 0% bracket as a bracket. I'm guessing you're not, though, because I can tell you misunderstand how the standard deduction and exemption affect your taxes.
I don't know how much your mortgage interest is, but it is possible that as a single person you will be able to get the tax deduction, but as a married couple, you will not (because the standard deduction is 6200 vs 12400 for a married couple).

The tax bracket is only part of the answer, there are other things she is eligible for with her current low income that you may not be eligible for as a married couple, like the savers credit.
Students are ineligible to receive the saver's credit.
If I understand correctly, I am currently in the 3rd level of the tax bracket and she would be in the second (for 2014). Am I right that filing jointly would move us both into the 2nd level, therefor substantially increasing the potential tax refund? It seems like a good chance that this would also be the case in 2015.
Incorrect. You really should just try running the numbers. Run them, and you will find that your fiance will owe nothing in taxes for this year (so long as she cannot be claimed as a dependent on somebody else's tax return - that is, she provided at least half of her support). And you are in the 15% bracket, which is not the 3rd level of brackets, unless you count the de fact 0% bracket as a bracket. I'm guessing you're not, though, because I can tell you misunderstand how the standard deduction and exemption affect your taxes.
I don't know how much your mortgage interest is, but it is possible that as a single person you will be able to get the tax deduction, but as a married couple, you will not (because the standard deduction is 6200 vs 12400 for a married couple).

The tax bracket is only part of the answer, there are other things she is eligible for with her current low income that you may not be eligible for as a married couple, like the savers credit.
Students are ineligible to receive the saver's credit.

Ran the numbers tonight. I was in the 25% bracket as single, and she was in the 10%. Filing joint puts us in the 15%. Would've taken the standard deduction either way. It ends up about a $950/yr benefit for 2014 and expecting the same in 2015.

MB1443

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Re: Should we get married before year end? Tax q's
« Reply #8 on: December 07, 2014, 07:02:11 PM »
I hadn't even considered it.  We are both high earners and getting married in November meant I had to write a 16k check.  Talk about a marriage penalty!

johnny847

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Re: Should we get married before year end? Tax q's
« Reply #9 on: December 07, 2014, 07:43:26 PM »
If I understand correctly, I am currently in the 3rd level of the tax bracket and she would be in the second (for 2014). Am I right that filing jointly would move us both into the 2nd level, therefor substantially increasing the potential tax refund? It seems like a good chance that this would also be the case in 2015.
Incorrect. You really should just try running the numbers. Run them, and you will find that your fiance will owe nothing in taxes for this year (so long as she cannot be claimed as a dependent on somebody else's tax return - that is, she provided at least half of her support). And you are in the 15% bracket, which is not the 3rd level of brackets, unless you count the de fact 0% bracket as a bracket. I'm guessing you're not, though, because I can tell you misunderstand how the standard deduction and exemption affect your taxes.
I don't know how much your mortgage interest is, but it is possible that as a single person you will be able to get the tax deduction, but as a married couple, you will not (because the standard deduction is 6200 vs 12400 for a married couple).

The tax bracket is only part of the answer, there are other things she is eligible for with her current low income that you may not be eligible for as a married couple, like the savers credit.
Students are ineligible to receive the saver's credit.
If I understand correctly, I am currently in the 3rd level of the tax bracket and she would be in the second (for 2014). Am I right that filing jointly would move us both into the 2nd level, therefor substantially increasing the potential tax refund? It seems like a good chance that this would also be the case in 2015.
Incorrect. You really should just try running the numbers. Run them, and you will find that your fiance will owe nothing in taxes for this year (so long as she cannot be claimed as a dependent on somebody else's tax return - that is, she provided at least half of her support). And you are in the 15% bracket, which is not the 3rd level of brackets, unless you count the de fact 0% bracket as a bracket. I'm guessing you're not, though, because I can tell you misunderstand how the standard deduction and exemption affect your taxes.
I don't know how much your mortgage interest is, but it is possible that as a single person you will be able to get the tax deduction, but as a married couple, you will not (because the standard deduction is 6200 vs 12400 for a married couple).

The tax bracket is only part of the answer, there are other things she is eligible for with her current low income that you may not be eligible for as a married couple, like the savers credit.
Students are ineligible to receive the saver's credit.

Ran the numbers tonight. I was in the 25% bracket as single, and she was in the 10%. Filing joint puts us in the 15%. Would've taken the standard deduction either way. It ends up about a $950/yr benefit for 2014 and expecting the same in 2015.
Please explain the numbers, because they don't make sense to me:
Your fiance made less than $10k this year. The standard deduction + exemption is $6200 + 3950 = $10150, which is more than her income. Hence, she owes nothing in tax.
You will make $44k this year. After standard deduction and exemption, that leaves you with $33850 in taxable income. You're in the 15% bracket until you hit $36900 in income.

MDM

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Re: Should we get married before year end? Tax q's
« Reply #10 on: December 07, 2014, 07:59:01 PM »
You will make $44k this year. After standard deduction and exemption, that leaves you with $33850 in taxable income. You're in the 15% bracket until you hit $36900 in income.
Me: take home pay of roughly 44k/year

The "take home pay" ambiguity strikes again...or does it?  Well, it's ambiguous....

No way to tell from the OP just what is in or out of that $44K - taxes, 401k, insurance, etc.?  Your guess is as good as mine.

Things would be much cleaner if people simply reported gross income....

johnny847

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Re: Should we get married before year end? Tax q's
« Reply #11 on: December 07, 2014, 08:13:03 PM »
You will make $44k this year. After standard deduction and exemption, that leaves you with $33850 in taxable income. You're in the 15% bracket until you hit $36900 in income.
Me: take home pay of roughly 44k/year

The "take home pay" ambiguity strikes again...or does it?  Well, it's ambiguous....

No way to tell from the OP just what is in or out of that $44K - taxes, 401k, insurance, etc.?  Your guess is as good as mine.

Things would be much cleaner if people simply reported gross income....
OH. I missed the "take home" part. Now I can understand how the OP can end up in the 25% bracket.
Not sure about the fiance, if that was also take home pay as opposed to gross pay.

OP, when asking a question about taxes, you should always talk about your gross pay, not your take home pay, and then also list any pre tax deductions, such as 401k, insurance, etc. Take home pay can be very heavily manipulated that it is borderline useless when talking about how much you will owe in taxes.

minimustache1985

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Re: Should we get married before year end? Tax q's
« Reply #12 on: December 08, 2014, 08:50:40 AM »
I think it depends if you want the people you're planning to invite to the original wedding date present for it or not- you can always throw a party to celebrate or do a vow renewal, but assuming you're not planning to get divorced between now and June 2016 you can't get married again then.

If you want to get married earlier than you'd originally planned, go for it.  Do something for the two of you whenever you want, or plan something small with your immediate families near the holidays later this month.  But if you/your FI want all your family and friends to witness you become husband and wife then I'd hold off until you can plan something that allows for that.

At the very least if you get married before and still have a "wedding" later on be up front with your guests that you're already married- I've known people who have traveled for one or agreed to be a bridesmaid and commit money to a dress only to find out it wasn't the couples real, legal wedding.  They felt lied to which caused some pretty major resentment, and honestly I'd be pretty pissed to spend my time/money to see a reenactment under false pretenses too.

Timmmy

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Re: Should we get married before year end? Tax q's
« Reply #13 on: December 08, 2014, 09:04:59 AM »
How much less than 10k did she earn? 

Did she earn less than $3950 gross?  Nobody else can claim her?  Did she live with you?  Did you provide more than half her support?  US Citizen? 

If yes to all the above, you can take her as a dependent on your return anyway.  She likely made more than $3950 but thought I would throw this out there anyway. 


TerriM

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Re: Should we get married before year end? Tax q's
« Reply #14 on: December 08, 2014, 09:42:57 AM »
I think it depends if you want the people you're planning to invite to the original wedding date present for it or not- you can always throw a party to celebrate or do a vow renewal, but assuming you're not planning to get divorced between now and June 2016 you can't get married again then.

If you want to get married earlier than you'd originally planned, go for it.  Do something for the two of you whenever you want, or plan something small with your immediate families near the holidays later this month.  But if you/your FI want all your family and friends to witness you become husband and wife then I'd hold off until you can plan something that allows for that.

At the very least if you get married before and still have a "wedding" later on be up front with your guests that you're already married- I've known people who have traveled for one or agreed to be a bridesmaid and commit money to a dress only to find out it wasn't the couples real, legal wedding.  They felt lied to which caused some pretty major resentment, and honestly I'd be pretty pissed to spend my time/money to see a reenactment under false pretenses too.

I posted a response to this, but deleted it because not only are you right, but you've pointed to a bigger question which is, if the OP and fiancÚ consider a civil wedding to be a valid marriage (as opposed to feeling that it takes a religious ceremony to be married), are they going to have the energy to plan a large ceremony/party 18 months out?  This may really be a question of whether to elope now for tax purposes or plan a wedding 18 months from now with family and friends, but would they really do both?