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Marriage and cohabitation.

One of the secondary effects of an increase in marginal tax rates is a higher "marriage penalty," the additional tax owed by taxpayers who file "married filing jointly," above what would have been due if they were single and had earned the same income. Thus, with higher rates included in the Revenue Reconciliation Act of 1993, this penalty has been increased. As a result, taxpayers contemplating marriage may be looking to see whether there are alternatives to married-filing-jointly status. In addition, unmarried couples living together have become much more common, and the tax ramifications of their status may also need to be clarified.


For federal tax purposes, the determination of whether a taxpayer is married is made on the last day of the year. In general, if two taxpayers are married on December 31 of any given year, the couple is deemed married for the entire year and may file jointly for that year. They also may file "married filing separately," but this usually results in a higher combine tax liability.

Common law marriages. The determination of a couple's marital status depends on state law. For an unmarried cohabiting couple, if the state of residence recognizes common law marriages (currently, 13 do so), the couple is considered married for federal tax purposes.

If a couple has an accepted common law marriage, they do not lose this status by moving and establishing residence in another state that does not recognize such marriages.

Divorce. As noted, a person's status on the last day of the tax year governs; if divorced on December 31, a taxpayer is unmarried for the entire year.

Legal separation. A taxpayer who is legally separated under a decree of divorce or separate maintenance is not married for federal tax purposes. However, taxpayers separated only by a written separation agreement are still considered married.


Dependency exemptions. If a state does not recognize common law marriages, taxpayers living together may be able to claim one of the cohabitants as a dependent of the other if certain tests are met.

1. The taxpayer provides over one half of the dependent's total support during the year.

2. The dependent has gross income of less than $2,500.

3. The dependent is a U.S. citizen, resident or national or a resident of Canada, Mexico or Panama at some time during the calendar year in which the taxpayer's tax year begins.

4. The dependent has not filed a joint return.

5. The dependent is a relative or unrelated member of the household who lives with the taxpayer for the entire year. This test may be a problem in some situations. Since this test is not satisfied if the relationship between an individual and the taxpayer is in violation of local law, couples living in those states in which cohabitation is not legal may be barred from claiming the individual as a dependent.


Head-of-household status is available for unmarried taxpayers who provide more than half the cost of maintaining a household for a taxpayer's unmarried children living at home for the entire year, his or her parents (whether or not living in the taxpayer's household) or a relative who qualifies as a dependent.

For unmarried cohabitants, the law of their state may again be the critical factor. If a taxpayer qualifies as a head of household under either of the first two categories, there is no problem. And, under the dependency test, in a state that does not bar cohabitation, the taxpayer can be a head of household as long as the dependency exemption tests are met. However, in those states barring cohabitation, the taxpayer cannot automatically be entitled to claim the cohabitant as a dependent and thus might not have the needed qualifying dependent.


The deductibility of itemized deductions depends on whether the arrangement is considered a common law marriage under state law. If the couple is considered married and married-filing-jointly status is selected, deductible expenses may be itemized, regardless of which taxpayer pays them. If the couple is not considered married, each may only deduct expenses incurred on his or her own behalf.

For a discussion of these issues, see "Filing Status of Unmarried Taxpayers Living as a Couple," by Larry R. Garrison, in the April 1995 issue of The Tax Adviser.

Ed. note: The material discussed provides general information. Before you take any action in this area, the appropriate code sections, regulations, cases and rulings should be examined.
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Title Annotation:from The Tax Adviser
Author:Fiore, Nicholas
Publication:Journal of Accountancy
Date:Apr 1, 1995
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