Marriage tax penalty, civil union/domestic partnership better?

Amazon
sKoA46

Go to company page Amazon

sKoA46
Sep 25, 2021 19 Comments

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?

47 PARTICIPANTS SELECT ONLY ONE ANSWER
VOTE VIEW RESULT

comments

Want to comment? LOG IN or SIGN UP
TOP 19 Comments
  • Biden screwing us again
    Sep 25, 2021 2
  • Adobe
    wGbp34

    Go to company page Adobe

    wGbp34
    I married my long time partner and our taxes went up because of Trump tax changes.
    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.
    Sep 25, 2021 2
    • Amazon
      sKoA46

      Go to company page Amazon

      sKoA46
      OP
      But what’s the difference for a CA civil union? All the rights and benefits appear to be the same, just with separate federal returns. I would consider us married, neither of us care what the government calls it.
      Sep 25, 2021
    • Adobe
      wGbp34

      Go to company page Adobe

      wGbp34
      I would make sure to talk to an attorney to understand the implications and make sure that the civil union is recognized the same federally (for your inheritance rights) or in any other state you choose to reside in. These are good conversations to have regardless! I will say that my husband and I are happy to be married otherwise, but having him complain about taxes incessantly kind of killed my joy for it. Could have just stayed unmarried and no one would’ve cared. But he had been in a serious accident and not having me as his designated parter was an issue. (A lot of LGBTQ++ people experienced this in the past, hence civil unions were passed in California.)
      Sep 25, 2021
  • GE
    birdee

    Go to company page GE

    birdee
    There are so many benefits that discriminate against singles. This is the best author on this topic.

    https://belladepaulo.medium.com/21-ways-single-people-are-taxed-more-and-not-just-financially-dcefd81ac862
    Sep 25, 2021 2
    • Google
      fluidX

      Go to company page Google

      fluidX
      I had to stop right away.

      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.
      Sep 25, 2021
    • Google
      fluidX

      Go to company page Google

      fluidX
      Ok, it’s not terrible, it’s just very grumpy.

      Kinda reminded me of Silicon Valley workers complaining how their 300k annual pay doesn’t make them rich enough to be happy.
      Sep 25, 2021
  • You can only claim SALT deduction if you itemize so you may be overestimating your pre marriage deductions by adding SALT and standard deduction for your fiancé.
    Sep 25, 2021 2
    • Amazon
      sKoA46

      Go to company page Amazon

      sKoA46
      OP
      Ahhh that’s a great point. I was overestimating. Thanks so much. So the real penalty is $47k of deductions vs. $35k. Losing $12k of deductions would be much less of a tax penalty than $22k.
      Sep 25, 2021
    • 12k deduction in your tax bracket is ~$4k in tax. If you’re not willing to get married for 4K in tax then you might not be in love.

      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.
      Sep 26, 2021
  • Google / Eng
    bigtitZ

    Go to company page Google Eng

    bigtitZ
    I have recently seen a post where people were discussing marriage tax penalty was not real and it would interfere on people's decisions about getting married. I will try to tag this post there so they can bring in their wisdom.
    Sep 25, 2021 2
    • Google / Eng
      bigtitZ

      Go to company page Google Eng

      bigtitZ
      I couldn't find the original post. Either deleted or Blind search sucks (or both).
      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.
      Sep 25, 2021
    • Google
      fluidX

      Go to company page Google

      fluidX
      What? Marriage tax is very real.
      Sep 25, 2021