Today TaxMama hears from Kevin in California who asks. “I know California isn’t a common-law state. But are there any other tax issues that I need to be aware of if I decide not to get married to my long-term girlfriend? With such high divorce rates, I’m beginning to think that remaining committed partners is the best option for our relationship. Can you point me in the direction or provide a few resources that talk about this type of scenario?”
You’re right, California is not a common-law state. So living together for 7 years won’t turn your relationship into a marriage.
There’s actually a pretty good article in a 1998 edition of The Tax Hotline, Tax Traps and Opportunities For Unmarried Couples. https://www.bottomlinesecrets.com/blpnet/article.html?article_id=17033
There’s an update in the June 2008 issue, where Tax Hotline interviews me on the subject, which updates the issues and adds some benefits.
Some issues to consider, if you live together but don’t get married:
1) California Is a Palimony state, which started with Lee Marvin, back in the mid’70s https://en.wikipedia.org/wiki/Palimony
2) Ownership of major assets, like the home. It’s bad enough to split up assets when you get divorced. But if you aren’t even married and own a home together, it gets harder to split up. Also, buying one partner out may result in capital gains…or not, if the profit is under $250,000 for half the property.
One benefit is, when you buy out your partner’s share of the house, you increase your tax basis in the home by the purchase cost. That doesn’t happen when you split up the marital estate.
3) Head of household – if your girlfriend decides to stop working and you support her, you won’t be able to use head of household status. You won’t have the benefit of filing as married. Sure, you’ll be able to get a dependency exemption. But that won’t save you much in taxes.
4) If the event of a break-up, if your girlfriend succeeds in a palimony suit and gets half of your pension plan – there are no protections in the tax code for drawing out half the money on her behalf. (There are special provisions for divorcing couples. ) You will have to pay taxes and early withdrawal penalties.
5) On the other hand, if you’re both working and earning a healthy income, you will find some distinct advantages to filing single returns, rather than joint returns.
Personally, if I had faith in my partner, I wouldn’t let divorce statistics deter me from marriage. I’ve seen a lot of good, solid, loving, long-term relationships. I would only avoid marriage if it my partner were not my best friend. If we didn’t thoroughly enjoy each other’s company; or if we were constantly picking fights with each other over insignificant things – the relationship won’t improve with marriage.
And remember, you can find answers to all kinds of questions about marriage and divorce and other tax issues, free. Where? Where else? At TaxMama.com[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.]
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- Tax Hotline – 1998 :: Tax Traps and Opportunities For Unmarried Couples
- Wikipedia :: Palimony