Marriage tax penalty, civil union/domestic partnership better?
My TC is 400k, fiancé’s is 215k. I currently itemize my deductions of $25k/year and she takes standard deduction($12k). Filing separately we each get $10k SALT deduction. My thought is that if we get married, whether we file jointly or separately - our situation is going to result in a significant marriage tax penalty. We would only be able itemize the $25k and have $10k SALT between the two of us for total income deductions of $35k vs. $57k. In addition, we’ll be pushed into the highest federal bracket and incur more of the 0.9% Medicare tax. I spoke with a CPA that confirmed my assessment.
I’ve been doing some research and the California civil union/domestic partnership seems like it would save us quite a bit in federal taxes. We would file a joint state return, but separate single federal returns.
Has anybody done this? Any pitfalls or reasons not to go with a CA civil union over marriage for tax reasons?
comments
He. Won’t. Stop. Complaining. He recently suggested that we divorce to lower our tax burden and I said yes but that I won’t ever marry him again. He wanted to get married in the first place. So if you’re going to be salty about it and if your fiancé doesn’t care, then maybe skip it but formalize things so that if there’s emergency then you can make decisions for each other, rather than the biological next of kin. If you want each other to inherit assets if one dies first then put it in writing. You actually need to do more paperwork to establish this stuff vs getting married.
https://belladepaulo.medium.com/21-ways-single-people-are-taxed-more-and-not-just-financially-dcefd81ac862
The first point is misleading. The point is, that the two married people will (in a non negligible number of circumstances) pay more than if they were two single people.
I’ll read the rest, but chances are this is a shock value article.
Kinda reminded me of Silicon Valley workers complaining how their 300k annual pay doesn’t make them rich enough to be happy.
When you two buy a home together your interest will spike and you can claim more deduction there. If she pays part of the mortgage and you aren’t married, legally that’s taxable income you have to claim.
I wish those guys that were making arguments like "Biden is good / Trump is evil / op's TC is 1M so shut up" (instead of focusing on the initial question) could come here to see there are real use cases.