Taxes and marriage

Hi everyone! I posted here a few times when The Billfold folded, and then stopped, but have still been lurking occasionally. And now I am overwhelmed by money things and it just occurred to me that I could post here.

So I got married last week. Exciting! We went to New Orleans and eloped and didn’t tell anyone. Did we do any research about how that would affect our finances? Nope!

We have lived together for a while with our finances 100% separate, and we planned on continuing that, as it has worked for us. We have pretty different attitudes about money, and we don’t really have any shared financial goals. (Not planning on having kids, I think it’s unlikely that we would buy a house anytime soon or possibly ever.)

Sooooo, uh, apparently it turns out that if we file jointly her IBR student loan payments could go up significantly, which she is definitely not ok with. For context, she makes around $43k a year and I make $63k a year. And if we file separately I won’t qualify for the lifetime learning tax credit, and I’m currently in grad school so that’s a big deal to me. I paid off all my undergrad loans a few years ago, but have federal loans for my master’s program that are obviously not in repayment yet (I graduate in June). So I don’t know if those loans will be taken into account for her IBR payments if we file jointly?

She has no desire to ever pay more than the minimum required for her loans, which I accept (this is one of the reasons keeping our money separate works for us, I was pretty aggressive about paying mine off).

I realize we probably just need to calculate it both ways, but I am kind of overwhelmed by what we do if we decide to file jointly–I pay for her increased student loan payment with my tax credit? Will it be easy to divide the return by what each of us would have gotten if we had done it separately? Is there someone we can hire to not only do our taxes but to advise us on exactly how each way would affect student loan payments? (I did ask a random CPA in a Facebook group I’m in and she said that’s not something she generally does?)

Apparently we really should have just waited to do it until 2022…

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I’m on Canada but recklessly becoming common Law last fall cost me clawbacks on a whole year of government benefits. Afterwards an accountant friend suggested early in the year for status changes. I’m so sorry you’re affected too

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I feel so silly that this never occurred to me…like I didn’t even know that getting married before December 31 meant for tax purposes it’s the whole year? Apparently you should Google things before you just go ahead and do them.

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I had even been married before! But when I was a tiny young thing and taxes didn’t matter. Plus people do summer weddings…why is January not the coolest month

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Been married a long time so I don’t have anything useful there.

But an idea: get a tax software program for 2021 and run numbers both ways or a blend until you find the best way forward.

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We’ll definitely be doing this, just not sure how to make it logistically work for both of our finances if we choose one that benefits the two of us as a whole…but financially we are not a whole! Like would I Cash App her every month for her increased IBR payment out of the Lifetime Learning Tax Credit I get, if that credit covers the amount? Or is it cleaner to just file separately and accept that I’m giving up that money?

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I’d also consult a tax person, but I’d want to have some idea of what changes, when, and how much BEFORE I went to H. R. Block or someone to talk about it.

I have had great tax people and at one who literally cost me a million dollars because they did the easy thing instead of the right thing and I ended up selling stock to cover it. That stock went up in the 12 months afterwards and would have been worth $1 mill+. I became an advocate for trying to figure out the ramifications beforehand.

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Yeah, we’ve both always done it ourselves in the past, but this might be the year we actually pay someone…but like, it’s not like we’ll be getting a ton back, so it seems silly to pay a lot!

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First, consider and discuss what being married means to you, philosophically. Then, run the taxes both ways and take the most advantageous for you both as a unit. Then, split the cost or benefit in line with your philosophical agreement, above, whether that’s 50/50 or 100/0.

No sense in kicking yourself for leaping before you look, that’s in the past. (Unless you want to consider annulment, maybe?) But the government does in many ways consider you a financial unit now, so it’s up to you to determine internal splits and boundaries if you want them.

For what it’s worth, my husband and I do “yours, mine, and ours”. Our pay is very similar, so we contribute equal amounts to joint accounts for joint goals (rent, groceries, car, house DP savings) but anything above that is our personal discretionary funds. We file jointly and generally have aligned ideas about money; we both paid off about 25k in student loans and are debt free now. It’s not the only way, though; a married couple I know wrote each other checks (like on paper) for mortgage and bills with 2 kids in the house (together about 8 yrs at that point). Point is the finances part has to align with how your relationship works overall.

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Philosophically, being financially independent from each other as long as we are both able to support ourselves is important to us. (Clearly things would change if we were not able to do that.) We’re 34 and 39 and we’ve made a lot of very large financial decisions independently and are now dealing with those, so I would never want her to have any responsibility for say, my choice to go to grad school (it was my choice and my risk to take, I didn’t consult her going into it), and I wouldn’t want to be responsible for her student loans either. We have pretty different priorities in regards to money and I know that combining finances wouldn’t be a good thing for our relationship. So I am very clear on that, no hesitation about it. We split the rent, we don’t have cars, we buy our own groceries and share food when it’s convenient. I just…want my Lifetime Learning Tax Credit!

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Which costs more to lose? I don’t think you can decide anything until you know. IMO you’re running into a problem of separate finances, which means you need to establish your own rules about who helps who, when, and to what extent. It’s tricky because on one hand you want to preserve financial autonomy but you also aren’t actually independent in reality.

I think having a set of ideals for dealing with these issues might help, like galliver suggested, because things like this will come up again. What happens if one of you gets fired and can’t find a job for 8 months? Will the other person help or not, how much, for how long? Does the helped party now owe the other party that money back? Or is it a gift? What if one of you gets hit with a huge bill, or one of you starts making 3 times what the other makes and wants a more expensive apartment. You are financially intertwined to an extent no matter what, because your lives are intertwined, so I think coming up with an ethos that is very directive (not just philosophical but, I will help you up to $10k, etc.) is a good idea if you want to go this route.

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Well it depends if you count the increased student loan payment as “losing” or not. I mean, it would actually lead to the loan being paid off quicker, leading to a benefit for her if I was the one paying the extra, which I would likely have to be.

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Sorry clicked too soon! And that’s a good point on the loan. Would you be comfortable paying that difference?

We filed jointly but kept our finances separate for about 10 years. No student loans to consider: my way was paid as I went and DH had a vet credit. We had a notebook where we kept track of the joint expenses: rent, food, car payment, insurance, etc. We’d pay from either account and write down the payments. When we got to where DH was making 3x what I was it got more difficult to keep the payments even, so we adjusted what I owed. It ended up that I got money in slugs and DH made more income, so for a while I paid for the extras and he paid the day to day bills. It worked for us.

I think if it was a small increase that I could easily pay out of the Lifetime Learning Tax Credit and then have plenty left over, then I think that would be fine. If it was significant…I don’t know. I am going to have my own student loans to worry about once I graduate my master’s program, and I do make more money than her, but I still don’t make a TON of money (and the fact that I make more money than her is related to the fact that I am pursuing a master’s degree that is costing me money).

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ugh, i’m in the same camp, but like seemingly even more confusing because I am phased out of a ton of stuff (like even IRA contributions due to my spouse’s income) and we have like 7 businesses between us but are financially separate.

So…our plan is that my SO will make me whole for anything that I don’t get access to (IRA deduction, etc) because of being married to them. It’ll probably amount to a few thousand dollars. They’re getting a $30K tax break from me, based on our initial calculations. They’ll just write me a personal check.

My SO has a tax attorney but the tax attorney has not been able to tell me what extra to withhold this year from my w2 job to cover my business taxes even though we asked in march, and the IRS calculator I use doesn’t really work with another person’s income in it (esp since we both don’t really know how much we’re making)… So the chances of getting someone to run both numbers is hard in my experience. And I used to be a tax preparer! I DIYed it out with a few scenarios using this calculator:

https://tpc-marriage-calculator.urban.org/

I feel the same way so it’s nice to see someone else in this camp.

Random other thing to know: now that you’re married, if either one of you can be covered by the spouse’s employer’s health insurance, you can’t get exchange insurance subsidies anymore (regardless of income). This is true EVEN if your spouse’s coverage isn’t affordable to you (based on affordability standards set at 8% of income) as long as it is affordable to them. So watch out for that.

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Oh that’s good to know about the health insurance! Hopefully we won’t be affected by this, but I was on an exchange plan for a month this year.

And it is also good to hear that we’re not the only ones keeping our finances fairly separate…I think part of me stressing about this is realizing that marriage clearly means something very different to us than it does to the IRS, and then I’m like, shit, what is marriage? We’re a queer couple in our 30s and it does not feel like this system was designed for us.

So…question…does this matter to her as much now that federal student loan payments are suspended through May 1, 2022? And were suspended this year? IBR shouldn’t go up retroactively, but just for the next year based on income filing.

I.e. see if you can calculate the difference between the higher payment (let’s say payments go from $100 to $200, so from $1200 to $2400 per year) and 5 months of no payments (so in total paying $1400 from June - Dec, so just $24 more per month this year.)

My SO is about to buy a Triplex that I would have legal claim to…but like ??? that seems very unfair to me since I didn’t do any of the work for it. Sh*ts weird. We only got legally married for citizenship purposes (not US) and we’re like “fuck we’re like married married to the government now.”

As long as that month was prior to your marriage (if your spouse has coverage that would cover you) you’re fine. Otherwise you will have to pay back the one month subsidy at tax time.

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Yeah, I saw the May thing! That definitely helps, but I think she will still not be thrilled that her payments will still be higher than they would be normally (since if we filed separately payments would still be suspended until then). But we need to figure out the actual numbers to see how freaked out to be about it.

And about the exchange, I figured I wouldn’t owe for that month, I just meant that since I had to this last year, it’s possible I might want to again in the future. But hopefully we will just remain insured steadily and it won’t be a thing.

I did the calculator and with a rough estimate of our incomes (I changed jobs halfway through the year and she got a raise at some point, numbers definitely aren’t exact) we would pay $47 less in income taxes if filing jointly so…yay? (Not taking into account the Lifetime Learning Tax Credit, of course.)

My husband and I spent quite a few years juggling the income contingent repayment/filing status thing, and we actually found it was of the greatest advantage to us as a unit to put the equivalent of one salary into tax-deferred retirement savings each year. If that’s possibly an option, you could split the deferrals between you, file jointly, and get to the same place as on one income, then take the lifelong learning credit. Plus you’d both have turbocharged retirement accounts. But unless you live somewhere with a low cost of living, that may not be an option.

Run the estimates on the student loan payments so you know what you’re dealing with: https://studentaid.gov/loan-simulator/ If your spouse is going for public service loan forgiveness, keeping the payments low makes sense (that’s what I did). If spouse is going for the income-contingent forgiveness after 25 years, it also makes sense, but unless the rules are changed, that forgiveness, unlike the PSLF, is taxable in the year forgiven.

Be aware if you go the MFS route, you can’t take a deduction for a traditional IRA either (unless you make less than $10K a year). But you can for employer plans like 401K, 403b, and 457K.

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