I’m getting divorced

We’re not sure we’re getting divorced, but we’re actively discussing the possibility. We have one big problem that’s tearing us apart and that we just can’t seem to resolve . . .

Our taxes are higher by roughly $8,000/year because we’re married. It looks like this number is likely to increase over time as well.

This is a back-of-the-envelope calculation and it doesn’t take into consideration other tax benefits that we would get if we were divorced. For example, we’ve done some work on the house that one of us could claim some portion of but we can’t collectively claim at all – I haven’t counted this in the $8,000 figure. Additionally, some of the benefits are hard to monetize, for example, one of us would be able to contribute to a Roth IRA if we were single, whereas since we’re married, neither of us can.

My wife’s benefits are bad and mine are good, so we’re going to do some analysis to see how much it would cost to buy decent benefits through her company. If the law changes to allow “domestic partners” to get benefits, we’ll get divorced immediately. Interestingly it looks like the laws are written such that benefits can only be shared by “same-sex” partnerships, meaning that gays get all the benefits of marriage (i.e. the ability to share benefits) with none of the drawbacks (i.e. higher taxes).

If we get divorced, we’d continue to live together and we’d still consider ourselves married – we’d just be legally divorced (the legalities of marriage have long since stopped being meaningful anyway).

So, to review, the tax structure incentives: same-sex partnerships over being single over being married.

Our country is retarded unlike some other countries.

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22 Responses to I’m getting divorced

  1. yikes! says:

    the post title had me worried for a second.

  2. dearieme says:

    IIRC, the inaugural edition of the Independent newspaper in the UK carried an article by the lawyer non-wife of a non-married couple explaining how much better off they were by remaining non-married. One item that took my eye was that she had had the courts instruct her non-husband to pay her the cost of “child support” which was taken from his salary tax-free. I think (but am not certain) that alimony is also tax-free in Britain, so perhaps that couple would have been even better off if they had first married and then divorced.

    • Foseti says:

      I was wondering about that. I think alimony is treated in such a manner that we could create some tax benefits.

      • Stephen says:

        But if you are still living with your “ex-wife,” I don’t think you’ll be able to deduct your alimony payments and she wouldn’t be able to exclude them from her income. Sorry.

      • Scott says:

        Alimony is deductible above the line by the payer and is included in the payees income. So it benefits if you’re in different tax brackets. Not sure if the rules change if you still live together. Child support is neither deductible or included in income.

    • sconzey says:

      As someone engaged to be married (in teh UK), soon to be a double income, and kids sooner or later, this is relevant to my interests ¬_¬

      I’d do the wedding anyway for religious reasons. I wonder if the vicar’d still marry us if we didn’t sign the register.

      • Handle says:

        Heh, that just says it all, doesn’t it. Once upon a time, people used to skip the religious wedding and go to city hall.

        Now we’ve got sconzey here who wants to obey the religious command while keeping city hall in the dark about it.

  3. Rob says:

    Does Hallmark even make a card for that? “Congratulations on your tax-related divorce?”

  4. Additionally, some of the benefits are hard to monetize, for example, one of us would be able to contribute to a Roth IRA if we were single, whereas since we’re married, neither of us can.

    Wait a minute, has my financial advisor been misleading me? Both my wife and I have contributed to Roth IRAs. I hope he didn’t mess up and tell me they were Roth IRAs if the are conventional IRAs.

  5. Samson says:

    Our country is retarded unlike some other countries.

    Hrm:

    The two Government matchmaking outfits, the Social Development Unit and the Social Development Service, will be merged so as to increase synergies.

    This new outfit will also do accreditation of private sector dating agencies to ensure that they are reputable.

    I am not certain what, in specific, this will entail, but it’s truly awesome to know that there are countries that just do things differently.

  6. anon says:

    I’d be really interested in a detailed breakdown of where the tax benefits are.

    Also, do you think the ‘marriage tax’ is going to get higher?

  7. Ulysses says:

    I tried to convince Penelope to go this route a while back. She wasn’t game.

    Here’s a Homer Simpson quote that’s applicable, but you might especially enjoy it, Foseti, as it speaks to your formalism: “When will people learn? Democracy doesn’t work!”

  8. JohnK says:

    John D. Mueller thinks that you guys are also disincentivized to have a nice big family.

  9. sardonic_sob says:

    My tax law professor, upon completing his discussion of the “marriage penalty” and other related tax drawbacks of marriage, smiled and said, “And that’s just one more example of how the government encourages immorality.”

    The joke was that he wasn’t joking, but we didn’t know it yet. Fifteen years of practice later, I laugh that I may not weep.

  10. Buckethead says:

    I actually get some – not a lot, but some – benefit tax wise from being married. But my wife doesn’t have any income, and that makes a huge difference.

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  12. ElectricAngel says:

    It’s even better if you have two kids, and each partner can claim “head of household” status. Also, if you are not “related” to your “spouse,” you can do all sorts of interesting things. Your ROTH IRA could write a mortgage on her house, and hers on yours. You could each then credit the interest to yourselves, and deduct said interest from income (works better if over 59 years old).

    If you want to know why immorality is so high, look no further than the Federal Government.

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