Thursday, September 28, 2006

Read This Post: Finances for Unmarried Couples

There is a great post at Queercents, guest-written by Tired But Happy. It's a really eye-opening look at the legal and financial issues facing unmarried heterosexual couples.
Some highlights:

[M]y employer denies my partner health insurance because we’re a so-called straight couple. If we were same sex partners, he would be covered, but because he’s a man and I’m a woman, he’s not covered unless we’re married.

Because the IRS considers me a single mother, I qualify for many tax credits I wouldn’t be eligible for if we filed together.

Since we’re unmarried, we don’t have that special exemption from inheritance taxes that married spouses have.... That’s why we own way more life insurance than a married couple with a similar income would need.

[I]f we split up, we can’t simply sell the house and split the proceeds. The amount of money that could change hands between us would be limited by the cap on tax-free gifts, which is currently $12,000 annually. So I couldn’t write a check to my partner for more than $12,000 without getting slapped with a gift tax.

We live in a common law state. If we don’t take measures to avoid fulfilling the criteria of common law spouses, we could wake up one day and find out that we’re legally married whether we like it or not.

Marriage is certainly an issue whose definition people are passionate about-- would it matter as much if it wasn't so tied to financial matters?


Abigail B. said...

You know, that post really ticks me off. They want the benefits of not being married (the child tax credits for the "single mother") and the benefits of being married (inheritance tax exemption, insurance) at the same time.

You can't have it both ways.

I hate when people draw parallels between same-sex couples and opposite-sex couples that aren't there. Many same sex couples *want* to marry, but aren't allowed. It sounds like this couple *doesn't want* to marry (for reasons which may be valid, but it's still a choice they are making).

I do agree with one thing that was said - it would be nice if the religious and civil aspects of marriage were separated. If, for example, you needed a "civil partnership" for legal/tax purposes, and then the "marriage" if you liked for religious purposes. I think that change is a long way coming, though.

Tiredbuthappy said...


Thanks for the comments. Here's what I wrote about our tax situation, which I edited down for the final version of the post. The edits were partly for brevity's sake, but mostly because I don't believe in evading taxes and I didn't want it to sound like I was trying to do that.

Taxes are that much more complicated. In our case, it actually benefits us at tax time to be unmarried. I declare our son as a dependent and take the standard deduction for head of household. My partner itemizes, and declares the house and all charitable contributions. Because the IRS considers me a single mother, I qualify for many tax credits I wouldn't be eligible for if we filed together. I get a certain amount of satisfaction from the fact that the government is hurting itself by having a narrow view of what makes up a family. Any time they let us file jointly, I'll be happy to pass up all those tax credits designed for single parents. But until then, I'm glad that I'm paying fewer tax dollars into the US defense budget.

About your other criticism: Yes, we are making a choice. I think it's important for some straight couples to boycott marriage because there are some people whose homophobia etc may not let them listen to same-sex couples who say that marriage is an unfair system. There's a chance that they may listen to us because their prejudices are not preventing them from hearing us. I don't know if this is true, but there's a chance I can effect change by making this choice and that chance makes it worth it to me to choose to forego the benefits of marriage.

I do not want to have both the benefits of marriage and the benefits of being unmarried. I want everyone to have access to equal benefits, whether they are married, unmarried, gay or straight.

The tax-related benefits I derive from being an unmarried mother only partially offset the penalties I face in terms of health care costs, social security survivor benefits, and all the legal rights that married people enjoy.

Again, thanks for the comments, which have given me a chance to clarify my position.

The Travelin' Man said...

Marriage is certainly an issue whose definition people are passionate about-- would it matter as much if it wasn't so tied to financial matters?

See, I think it wouldn't matter as much if we could take out the religious aspect!

mOOm said...

I think all financial things related to marriage should be removed. There should still be financial help for raising children which benefits society. In Australia there is no such thing as a joint tax return. Each person must submit their own. There isn't an inheritance tax either. Tax strategies for couples are all about whose name to put particular assets in to take advantage of different tax brackets. Australia pays the age pension to seniors who are poor enough. It doesn't depend on contributions and so there are no partner inheritance isseus there either. The whole system is far more rational to my mind than the US system.

SkippyMom said...

In regards to the gift tax issue....why don't you put both of you on the title as joint tenants in common (which you don't have to married for and you don't have to both be on the mortgage) and therefore when the house is sold or one of you dies than you have the option of splitting the proceeds equally....don't argue gift tax on a house that you can both be on the title on - you aren't correct in this matter and it is a poor argument.

As for the whine regarding "We don't get benefits b/c we aren't married, but if we were same sex than my partner would" is such complete you have an employer that is in the what? 5% of the entire employers in the US that offers same sex benefits - that is a boohoo sorry for you argument and not fair to same sex couples. They can't get married - you can and there is the ruse - you just don't want to. Which is fair - no doubt - but remember can't vs. won't is a different set of rules.
I hope I don't come off as too offensive, but if it walks, talks and looks like a "duck" - you quack baby.

SkippyMom said...

...oh, and if the father of your child is your unmarried partner than you are illegally claiming "Head of Household" and if he isn't the father and you receive child support and live in a home with another person that makes more than you than you may need to check your "Head of Household" status on that - you are probably claiming "EIC" too aren't you?
Be careful - sounds like you are skirting the IRS a bit close to suit what you feel is unfair b/c you are boycotting marriage due to the unfair status -
Quack, quack.

Tiredbuthappy said...

You make some good points. I'll look again to make sure I'm not mistaken about inheritance taxes on shared assets and who declares what. I definitely don't want to run afoul of the IRS.

Just so you know where I'm getting this stuff:

My source re: inheritance taxes on his half of the house (and yes, we are tenants in common) is the book Money without Matrimony. As for gift tax, thanks for setting me straight on that. If we could request to split the proceeds equally then the gift tax wouldn't be an issue. I've never sold a house, so I guess I imagined receiving one check and having to figure out how to split up the money without the IRS wanting a peice (beyond cap gains, if applicable). I doubt the IRS would really throw the book at us anyway even if I did write him a check for more than $12,000 in any given year. You're right that that's a weak argument, and I'll certainly leave it out of future writing and conversations about this.

My source re: declaring Head of Household, etc, is IRS Pub 501. Yes, the father of my child is my unmarried partner and we all live together. I currently earn more money than he does, altho I didn't always. Ever since our son was born, I have paid for his childcare through a Flexible Spending Account at my work, which requires that I declare him as my dependent on all relevent tax forms. He is also on my health insurance, not his father's.

Here's a key quote:
"If you and another person have the same qualifying child, you and the other person(s) can decide which of you will treat the child as a qualifying child."

I'm reasonably sure the ways we've interpreted the tax code are correct. Thanks for making me look again, though. I think it's good to reread the IRS language now and again to make sure I'm not doing something wrong unintentionally.

I must admit it was challenging for me to ignore your tone so that I could consider your arguments. Your arguments are very good and I do think you're right about gift taxes. I also think that you're right that my reference to my employer's partner benefits policy is inappropriate and weakens my overall argument. I meant it to be ironic, but it could certainly be read the way you read it.

Thanks again for the useful points, cloaked as they were in insulting language.

Anonymous said...

wow, tiredbuthappy, i admire your responses! really mostly to the later comments. actually made me decide to check our your blog, believe it or not. (i'm not usually compelled to look at blogs due to comments).

Anonymous said...

You just have to report to the IRS if gift to a single person in a calendar year is over $12,000. No, you don't pay any gift tax until it reaches a lifetime limit of $1 million (check to see the latest figure).