[FoRK] Why is married filing separately even a thing? (in the US)

Stephen Williams sdw at lig.net
Sun Feb 9 18:20:45 PST 2014


On 2/9/14 2:13 PM, J. Andrew Rogers wrote:
> On Feb 9, 2014, at 1:42 PM, Joseph S. Barrera III <joe at barrera.org> wrote:
>> Each year I look at how much more my fiancee and I would pay in taxes if we were married, and it's always several thousand dollars more.
>>
>> (Offsetting that, our combined health insurance costs would be several thousand dollars less.)
>
> At a growing number of companies, the health insurance policy allows you to semi-arbitrarily designate another person as covered. It is a generalization of the “domestic partner” allowances. It is like that where I work.
>
> I know guys with excellent health insurance that is 100% paid for by the company that also have their girlfriends covered and paid for 100% by the company. No marriage necessary. The majority of companies still don’t work that way but, at least around here, it is gaining popularity. It is easier than trying to write policies that account for every edge case that will always look discriminatory with respect to benefits.
>
While consulting a couple years ago, after exhausting COBRA (which I was very lucky to sign up for 3 days before the end of a 
75% rebated/discounted rate during the recession), I took advantage of this through my SO's company.  I was hit with a 
substantial (thousands) tax bill as the health insurance in that case is considered imputed income to the non-employee.  It was 
still probably better than any alternative that I had at the time since it was impossible for me to buy an individual policy 
before Obamacare. Now, it probably is better to buy such a policy rather than be on her policy.  Anyway, a larger company not 
California based bought her company and did away with that benefit.

I've checked several times over the last 17-18years: it would have cost us >$10,000 in extra yearly taxes to be married.  Except 
for that post-COBRA stint, we've always had employer medical insurance, and for 8 years mine was completely paid for.  Adding 
other key reasons to keep finances separate, it has made no sense so far to be married, saving us somewhere between $200K-500K.  
The marriage penalty was high for us as we were both employed the whole time and until recently we were both head of household.

Interestingly, there are some loopholes around marriage and divorce that might support getting married and divorced multiple 
times in certain circumstances.  One big one: divorce settlements and alimony are generally not taxable income.  The best way to 
transfer money to someone tax free is to marry and perhaps divorce them or their parents.  Might explain a few well-known 
examples.  Additionally: Children working for the family business have special rules.  Money provided directly for a purpose, 
such as if you paid for someone's college, generally isn't considered income.

Stephen



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