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How can heterosexual couples avoid marriage tax penalty?

Many New Jersey couples who are thinking about tying the knot may be interested to learn that the state allows civil unions for all couples and domestic partnerships for heterosexual couples over the age of 65. What this really means is that couples can chose these options over traditional marriage in order to avoid the so-called marriage tax penalty.

Many of the civil union and domestic partnership laws have been legal in a number of states, including New Jersey, for more than a decade. While some of the laws are only available to same-sex couples, others permit all heterosexual couples to join in a civil union or domestic partnership. Still others only permit heterosexual couples over the age of 65 to join in a domestic partnership.

A marriage tax penalty occurs when both individuals make similar incomes and end up paying more on a joint return than if they had filed separately. If one person makes more than the other, a marriage tax savings usually results. Civil unions and domestic partnerships do not qualify to file joint returns at the federal level but offer most or all of the legal benefits of a marriage. While choosing this option does not allow the heterosexual couple to file jointly, they are always able to get married at a later date if they feel that it is a financially smart move for them.

While civil unions and domestic partnerships are meant to give couples the same rights as married couples, this does not always happen. For example, many benefits available to married couples are not available to members of domestic partnerships. An attorney may be able to help a same-sex couple or a heterosexual couple who are looking to join in a union or partnership understand what their rights are and how to best protect themselves in the event the relationship dissolves.

Source: The Christian Science Monitor, "Could heterosexual couples use domestic partnerships to avoid marriage tax penalty?", Howard Gleckman, June 06, 2014

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