Should I get married for tax purposes?

October 30, 2006 7:02 PM

Should I get married for tax purposes?

Posting for a friend:
I am going to start working as a teacher in Philadelphia. I will be making $39,000 a year. I am a single, 23 year woman. Would marrying my boyfriend be a wise financial choice in terms of tax breaks?
My only concern is that the bf is still in college, and I am worried that this might lessen his chances of getting financial aid. Currently, he makes about 2k a year from work.
We're planning on getting married anyway, but if this could save us any money, we'd be more than happy to have a small ceremony now.
If anyone who's done this before has any advice or just general knowledge on the subject, it would be greatly appreciated.

posted by Dance Commander to law & government (26 answers total)

No. Just.... just no.
posted by Effigy2000 at 7:04 PM on October 30, 2006

If you don't have a specific dollar figure in mind that this approach would save for you, I think the answer is 'no'.
posted by pompomtom at 7:14 PM on October 30, 2006

That's kind of a flippant answer, Effigy. I think she's talking about the timing of the wedding more than the choice to get married. I think it deservers a better anser than that, which I'm not really qualified to give.

I suspect that without more detailed financial information, it'll be hard to give a decent answer. I'd suggest talking to a financial planner.
posted by empath at 7:14 PM on October 30, 2006

What about common law status? I'm not American so I won't guess at how it works there, but your friend should definitely look into it.
posted by ODiV at 7:18 PM on October 30, 2006

your boyfriend's financial aid package probably will suffer if you get married now. the grants will drop off but you could take out loans to cover the lost amount.

i have no idea what the tax breaks you would get for getting married. consult with a fiancial planner or, better yet, have you boyfriend talk to his college's financial aid office. they'll have a better idea of what exactly would happen.
posted by Stynxno at 7:24 PM on October 30, 2006

My BF and I had his CPA do our taxes as if we were married -- just to see. We came out worse.
posted by Kloryne at 7:25 PM on October 30, 2006

Get tax forms from the IRS. Pull last years tax returns. Look at how much tax you each owed (before applying the credit for taxes withheld from your paycheck). Go to the IRS and dig up another copy of the form and fill it out as if you were married filing jointly. Which arrangement gives you the lowest total tax bill?

This assumes your incomes this year will be similar to last year. If not, you'll have to make adjustments.

Also, you might consider whether you provide enough support to your boyfriend to claim him as a dependent without doing the married filing jointly thing.

I don't know about the financial aid question. The financial aid office should be able to provide some insight.
posted by Good Brain at 7:32 PM on October 30, 2006

Your best move is to buy TurboTax or similar software and prepare your expected tax returns two ways: one married, one not. You could also do it three ways, so you can see the effect of married/jointly and married/separately. (Or you can do it on paper if your tax situation is straightforward and you have the time.) This should give you a relatively clear picture of the tax issue. In situations like yours where one spouse makes a decent income and the other makes little or nothing, marriage tends to be tax advantageous, but you have the run your own numbers to determine what works for your situation.

The financial aid question is a different matter entirely. I know a couple that has avoided marriage solely to maintain one partner's financial aid eligibility. You need to look at the financial aid eligibility guidelines at your dude's school to figure that out.
posted by brain_drain at 7:36 PM on October 30, 2006

Probably not, unless you've got kids, mortgage or other tax deduction(s). When I was single, many years ago, I claimed "single, 1 deduction" on my w-whatever form. So did then boyfriend. We each made around $20 k a year and we each got back around $2-300, so we figured we were claiming the correct amounts. We got married, and our take-home pay increased by about $200 a month each. Then tax time came. We owed $3000! We were told that because we had nothing to deduct, we were basically screwed. Now, many years later, still renting, still no kids, but double the income, we both claim zero, and have them withhold at the "single" rate, and I have them take out an extra $50 per paycheck, and we just about break even. (I'm including the Feds and state here) Last year we got a whopping $11 back. Husband and I have used Turbo Tax to map out our possibilities- married filing jointly, married filing separately, and there's virtually no difference. Stay single and get married when you were planning to get married. And if you're not going to have any deductions (house, kids) right away, start saving for April 15th!
posted by deedeep at 7:50 PM on October 30, 2006

If you claim him as a dependent, that will probably effect his financial aid status as well. Talk to an accountant.
posted by Meep! Eek! at 7:51 PM on October 30, 2006

I second what deedeep said, since she's given you firm numbers.

My partner and I have also done the math (we were looking to save on insurance and because renting 'with a roommate' sucks when you're not married) and as we're childfree, we found we're better off not getting married. And his financial aid will likely drop significantly, if that is a concern.
posted by cobaltnine at 7:58 PM on October 30, 2006

I am worried that this might lessen his chances of getting financial aid. Currently, he makes about 2k a year from work.

This is a serious worry -- I know someone who apparently got married kind of on a whim (they had been together a long time, just happened to actually get married) and completely lost her Javitz fellowship (I think after getting only 1 year of use out of it) because of this. Your boyfriend's school probably has financial aid office that could help with questions like this.
posted by advil at 8:29 PM on October 30, 2006

The boyfriend's financial aid might not drop after getting married, depending on whether he's considered financially independent or not by his school/FAFSA. As discussed in this thread, marriage is sometimes one of the only ways to prove that you're not financially supported by your parents to the financial aid office. So if he has an expected family contribution, and his parents make more than you, he might not come out behind if you get married. But IANA accountant or financial aid officer, and I don't know your specific numbers.
(on preview, definitely follow advil's advice to check with the financial aid office)
posted by twoporedomain at 8:38 PM on October 30, 2006

If the only concern is the financial aid aspect, your friend and her boyfriend should talk to a financial aid counselor at his school. I also second the financial planner aspect, but he or she might not have as much insight about the particular financial aid package that your friend's BF is on.
posted by ml98tu at 8:47 PM on October 30, 2006

If he's under 25 and his parents make more than you, he'd be better off marrying you since it would free him of having to claim the parents' income.

If he's over 25 he doesn't have to claim his parents' income, so if he was pulling 2k/yr he'd be worse off with financial aid.

Federal student aid is ridiculous: It assumes that your parents help you with school until you're 25, whether or not they actually do. The more money they make, the less student aid you get. Nothing you can say will change this assumption, and until you're 25 it takes a judge to get out of it unless you're married or join the military.
posted by mullingitover at 9:03 PM on October 30, 2006

As a single person, you're getting taxed at a rate of 25 percent on every dollar you make over $29,051 -- on top of a base tax rate of approximately $4,000. That extra tax adds up to about $2,500. Total federal income taxes: approximately $6,500.

As a single person, your boyfriend is paying 10 percent of his income in taxes -- about $200.

If you were married filing jointly, your $10,000 in income above the 15 percent line and his $2,000 in base income would all be taxed at 15 percent, so you would be taxed about $1,800 on it. Total federal income taxes: approximately $5,800.

So by getting married you'd save about $9200 in federal taxes each year. (source)

You'll need to go through the same set of math questions with state income taxes, if relevant where you live. It would be helpful if you included a location in your profile.

Is your fella's financial aid calculated based on his parents income? If they have a combined income higher than your own income, odds are good that he'll be eligible for more aid once married to you. If he's already independent, however, it may be worth waiting to marry before you start filing your taxes together.
posted by croutonsupafreak at 9:49 PM on October 30, 2006

Argh! By getting married you'd save about $900 in federal taxes each year. Please ignore that "2."
posted by croutonsupafreak at 9:50 PM on October 30, 2006

Croutonsupafreak gets the numbers right (except for that rogue 2.)

I'll just add one thing I wish someone had told me when I got my first job: your 401k is the best tax dodge imaginable, better than houses, much better than husbands and babies. Save as much as you possibly can there, up to the federal maximum ($18750 this year, I think). If your employer does matching contributions, that's free money! Even if not, you're saving all that money before tax. Future-you will be very grateful.
posted by rdc at 4:36 AM on October 31, 2006

My only concern other than financial aid (which would more than likely drop significantly) would be health insurance. If he is still covered under his parent's health insurance and he married you, he would be dropped from their policy - he would no longer be a dependent for them, but would become one for you. Also, rdc is right about the 401K - since you aren't used to making that much money, you won't miss the money you put into it, it will lower your taxes by lowering your income (and possibly lowering your tax bracket as well). Don't forget to fund your flexible medical account too - pretax income that can be used for prescriptions, medical co-pays, certain OTC purchases, and dental and vision expenses. All these things help lower your taxes - I make almost $15K more than I declare on my taxes.
posted by blackkar at 6:10 AM on October 31, 2006

Um, I just realized that number isn't very helpful - it works out to be ~20%.
posted by blackkar at 6:13 AM on October 31, 2006

Back in the day, me and my girlfriend filed as "common law married" -- basically just married filing jointly. The rule was something lame like you had to be living together "as man and wife" for at least 6 months. Anyhow, it saved about $1000/yr -- no kids, no deductions -- until we got married for reals. She had a scholarship, and it didn't affect her, but I don't think she mentioned it to the school, either.

That was in South Carolina, so the law may differ in your state. Still, it would seem a good way to get the ball rolling.

My rule of thumb: If one person makes all the money (I was working, she was a student), you'll probably save money filing jointly. If you have similar incomes, you'll probably pay more.
posted by LordSludge at 6:28 AM on October 31, 2006

I'm pretty sure that what LordSludge is suggesting -- lying to financial aid about your marital status -- is a bad idea. The risks if you're found out include losing all financial aid, getting in legal trouble for fraud, and getting in trouble with the school for dishonesty. Not worth the payoff of saving a few hundred bucks at tax time, in my opinion.

Most states in the U.S. do not have "common law marriage" status available. In those that do, common law marriage is pretty much the same as marriage. You can have a real wedding later, but you're already married once you hold yourself forth as married and meet other state-by-state requirements. If you choose to break up after holding yourself to be married in a common law marriage, you still have to go through a divorce. (More info here.)

Disclaimer: I'm not a lawyer, just someone who's read a bit about this stuff.
posted by croutonsupafreak at 6:43 AM on October 31, 2006

It's been said already, but money is never a reason to marry. Never, never, never. NEVER!
posted by kc0dxh at 7:12 AM on October 31, 2006

actually to follow up on the insurance issue, if you are working as a public school teacher, typically you will have pretty good insurance (i'm not familiar with philly specifically though so i dunno). being married gets him on your insurance and could end up saving a lot depending on if hes been kicked off his parents insurance yet.

also, getting married to help your taxes is a perfectly great reason to get "married". a piece of paper is just that, "marriage" is what you make it. if the motivations are 100% financial, just make sure you have a prenup.
posted by teishu at 7:25 AM on October 31, 2006

When I got married, my taxes went up, not down. I'd say hold off on it.
posted by mathowie at 9:30 AM on October 31, 2006

Thank you! to everyone who actually read the question and gave a thoughtful answer. My friend's going to wait until they both graduate (and aren't broke) to have a proper wedding. :)
posted by Dance Commander at 7:17 PM on November 14, 2006