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Financial Planning / Tax Strategies
|Subject: Re: Marriage Penalty Returns||Date: 1/20/2013 7:29 PM|
|Author: SamuelClemens||Number: 117441 of 121114|
I thought I explained that pretty clearly. We desperately needed that extra $$$. This couple does not. I wanted credit in my own name and being single was, at the time, the only way I could see to get it. We did not have children. This couple does. The presence of children makes a HUGE difference.
I think this veers off topic a bit, but I have to say that I find the above line of reasoning very odd. Especially coming from someone who divorced motivated, at least partially, to avoid the marriage penalty.
I am just searching out the information, but from what I have learned there is nothing illegal in what I am proposing. If there is, then I won't do it. I have never considered divorce. Is "I want to save taxes" not a valid reason for a divorce in California? I have no intent to fake a reason for the divorce we are considering.
In doing the little bit of research I have done, I have run across articles which suggest to high earning couples that are wanting to marry that they live together instead. How is that any different than what I am proposing?
What I really question is how 1) having kids and 2) being able to afford the extra tax alters the argument. What I am proposing it to do some work to get a divorce and set up some kind of trust which would simulate the rights of a married couple. I am going to assume that it is not illegal. The process would likely clean up some issues my wife and I haven't considered before.
Assuming it is not illegal, then how is this different than any other action to save money on my taxes? If I have children or make over a certain amount then it becomes immoral (if not illegal)? I am only supposed to behave morally if I have kids or make over a certain amount?
I went through steps to set up 529 college accounts for my children. It saves money on taxes. Because I could easily afford the tax, should I stop contributing? Similarly we contribute to retirement accounts. Should we stop? Do you think more or less of me because I take advantage of the company's 401k plan?
We deposit money into a health savings account because it saves in taxes? Am I immoral for doing this. How much do I get to make before it becomes immoral, or is it a progressive type thing. Where is the line between good tax planning and us depriving poor families tax money used to educate their children?
I just went shopping with the wife. I could have driven to the Costco in the adjacent county and paid the 1% higher sales tax. Was I immoral in choosing the local Costco? We can afford it.
The tax code is simply that -- code that defines how much you pay. People make maneuvers all the time to reduce their taxes. Doing so is not immoral in my mind. The code encourages and discourages all sorts of behavior. In this case it is discouraging high earning couples from marrying and encouraging married couples to consider divorce. I do not think it is just that an unmarried couple with the same earnings as my wife and I would pay $100k less in taxes over the next five years. Fix the code, I say, but until it is fixed I will consider this route. I admit it is drastic, but the tax savings is large.
To answer some of the other issues brought up in other posts ...
We do not have a mortgage. Religion is not an issue. I did ask my CPA to access our marriage penalty and her answer was slightly higher than what I had estimated (because of state taxes). Our taxes are complicated and passed my ability (or at least desire) to tackle it on my own many years ago. California is not a common law state.
inparadise asked: Is taxation an accepted reason to legally dissolve a successful marriage and go back to the state of living out of wedlock, or will they have to lie about why they are divorcing? Do you really want to teach the kids through your example that it is OK to lie, as long as you profit from it?
That is a good question, but let me be clear. I would never lie to achieve the divorce and am not proposing to do so. The second question doesn't apply.
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