Tax Consideration for Unmarried Couples
By Saghir Aslam
Rawalpindi, Pakistan
(The following information is provided solely to educate the Muslim community about investing and financial planning. It is hoped that the Ummah will benefit from this effort through greater financial empowerment, enabling the community to live in security and dignity and fulfill their religious and moral obligations towards charitable activities)
According to the US Census Bureau, almost 17 million Americans live together as unmarried couples, an increase of nearly 150% since 1990. For those couples, there are numerous financial considerations that singles or married couples may not have to think about. If you're among the 17 million, whether you're looking ahead to April tax time or just starting to map out your financial goals, Kirk Pacatte, a Life Events Services, Tax and Planning Specialist at Wells Fargo Advisors, suggests putting together a plan as soon as possible and updating that plan annually with the help of your financial advisor State laws. State laws determine marital status for federal tax purposes. You are considered married if the marriage is recognized by the state where you live or where the marriage began. Because filing status is used to determine your filing requirements, couples should contact an attorney in their state if they have any questions on their marital status, says Pacatte. Children. For unmarried couples with dependent children, only one partner may be permitted to file under the head of household status, explains Pacatte. In order to claim head of household filing status, you must be considered unmarried, you must have paid more than half of the cost for maintaining your home, and a qualifying person lived with you for more than half the year. "if you qualify to file as head of household" says Pacatte, "your tax rate usually will be lower than the rate of someone filing as single. Also, your standard deduction will be higher compared to someone filing as single" If you have minor children and each of you provide Support, you'll need to determine who will file as head of household, claiming the children as dependents, and who will file as single. "The parent claiming the child as a dependent would file as head of household," says Pacatte, "and be the one to claim any additional tax benefits related to the child, such as personal exemption, earned income credit, child tax credit, and credit for child and dependent care expense." Gift limits and joint assets. U.S. citizen spouses can transfer an unlimited amount to each other during life or upon death, according to federal tax law. But unmarried couples are subject to the same annual gift tax exclusion as individuals, meaning you may give away up to $15,000 per person during a calendar year to multiple people (keeping in mind the lifetime exclusion amount in 2018 is $5.6 million). This is especially important when you begin planning your estate. "If unmarried couples have joint assets, such as joint bank or investment accounts or a joint residence, there may be additional work to allocate the income and potential deductions produced from these assets" says Pacatte.
- "They should consult with a tax advisor on how to locate the joint income and expense items among taxpayers.
- They should consult with tax advisor on how to locate a joint income and expenses, among tax payers. Let me share with you some very useful information practically for everyone. Start saving money as easily in your life as possible. Matter of fact consider start saving and start investing in your R.I.R.A as soon as you get your first day check add into your I.R.A account as much as government allows you to add to I.R.A. To the best of my knowledge at the present and I am investing as much as $5500 each year. The people who start saving and investing in your ROTHERA by the time you will be happily surprise. IA by that time you will have own excess of million dollars. If you start with your first paycheck and even you invest maximum amount allowed by the government. You must be careful how you invest this money it’s a long-term investment and this is your retirement fund which you do not speculate. You should invest wisely after doing your proper homework, where you can get average return 8% per year. Once again this must be invested after doing your proper homework. Investing conservatively so that you do not lose your original investment and you get slow and study the increase every year, Remember the story of turtle and rabbit. people who want royalty: rich quick sometimes end up losing large amount of funds whereas on the other hand if you are doing your proper homework and investing the companies long term good growth. There are companies that they pay good dividends. Some companies not only pay dividends each year but these dividends continue to increase. You want to invest good solid companies. By the time retirement time comes, you will be delighted what you have accumulated.
(This article was written in collaboration with wall Homerding , Senior Vice President in Wellfargo in their Newport beach California Office).
(Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, nor does he suggest that anyone will earn a profit when or if they purchase stocks, bonds or any other investments. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor, or certified financial planner. Mr Aslam does not have anything for sale.)
-----------------------------------------------------------------------------
