Should I divorce high-income spouse for tax purposes?

[frugalnacho]

bobechs always gives me a chuckle. 

But seriously, just file MFS.  How is this even a thread?  Does it not provide the answer to the ops tax situation, while still retaining all the benefits of marriage, or do I have a serious misunderstanding of what MFS is?

nothing to do with gay marriage, but reminds me of doug stanhope's bit on marriage:

[dandarc]

bobechs always gives me a chuckle. 

But seriously, just file MFS.  How is this even a thread?  Does it not provide the answer to the ops tax situation, while still retaining all the benefits of marriage, or do I have a serious misunderstanding of what MFS is?

MFS sucks for OP's situation.  Fundamentally, you take the MFJ tax brackets and divide by 2, and there's each persons MFS tax bracket.  That is not the same result as two people filing Single - just look at the tax brackets side by side at higher incomes (25% marginal bracket and up).  Then you've got a bunch of other little things.  MFS and want to contribute to an IRA?  Hope you made less than $10K and are happy with your partial deduction.

MFS is rarely the optimal tax-filing option, although once in a while it works out.  One spouse with very high medical deductions is a case where MFS sometimes works out better.

So I'd yes, you have a misunderstanding of what MFS is.

[dandarc]

Put another way, if you are married, typically your combined taxes paid will be the same whether you file Joint or Separate (ignoring things like the "no IRA deduction from MFS"), but the tax may be different compared to 2 unmarried people filing single.

Of course, I believe we found above that the bulk of the OP's problem wasn't as much the marriage penalty increasing total taxes as it was a somewhat inequitable split of the taxes between OP and OP's much-higher-income spouse in their split-finances arrangement.

[frugalnacho]

bobechs always gives me a chuckle. 

But seriously, just file MFS.  How is this even a thread?  Does it not provide the answer to the ops tax situation, while still retaining all the benefits of marriage, or do I have a serious misunderstanding of what MFS is?

MFS sucks for OP's situation.  Fundamentally, you take the MFJ tax brackets and divide by 2, and there's each persons MFS tax bracket.  That is not the same result as two people filing Single - just look at the tax brackets side by side at higher incomes (25% marginal bracket and up).  Then you've got a bunch of other little things.  MFS and want to contribute to an IRA?  Hope you made less than $10K and are happy with your partial deduction.

MFS is rarely the optimal tax-filing option, although once in a while it works out.  One spouse with very high medical deductions is a case where MFS sometimes works out better.

So I'd yes, you have a misunderstanding of what MFS is.

Ah, yes, serious misunderstanding of MFS.  I thought it mimicked the single brackets. 

[Metric Mouse]

Fundamentally, you take the MFJ tax brackets and divide by 2, and there's each persons MFS tax bracket.  That is not the same result as two people filing Single - just look at the tax brackets side by side at higher incomes (25% marginal bracket and up).  Then you've got a bunch of other little things. 

This.  When I add the tax losses into the equation, even a frugal wedding suddenly becomes a massive hemorrhage cash.

[Heckler]

I would be HIGHLY concerned if my spouse was okay with a divorce to save on taxes.  What happened to "married, filing singly"?

and doesn't the US have "common-law spouse", where you're considered a spouse in the taxman's eyes if you live together for more than 1 year?


<edit> depends on the state

https://en.wikipedia.org/wiki/Common-law_marriage_in_the_United_States

[Cassie]

Very few states still have this and if they do it is something like 10 years of living together, representing yourself as spouses to the community and some other requirements.

[slowsynapse]

When I did taxes, I occasionally was asked to do a single tax return for both spouses in addition to the married filing jointly return.  Some people with really segregated finances would pay each other back for the tax burden they otherwise would not have had as a single person.  Usually, a higher earner will benefit from the married status.  A lot of tax prep softwares will even let you mark all pieces of income and deductions as belonging to one spouse or the other.  Married filing separately almost never works.  Divorce almost never works either (at least for this reason).