Cohabitating couples & Tax

CIARAN_BOYLE

Peregrinus wrote: »

Leaving aside whatever religious signficance you do or don't invest in the relationship (which is no business of the state's, obviously), marriage is essentially a mechanism by which a couple seeks and obtains societal recognition of their relationship. And if couples choose not to marry, the signal they are sending is that they don't want societal, official, administrative recognition of their relationship. And I don't think they can them complain that their relationship is not being recognised.

I think the injustice they see is that social welfare recognises a relationship but revenue doesn't.


To which my response is that there's no benefit unless there's an obligation to support your partner. A couple recognised by social welfare could split up tomorrow and quickly be entitled to social welfare without counting towards each others means test. A couple recognised for tax purposes could split up tomorrow and remain access to each others tax credits as they remain reliant on each other financially.

Peregrinus

CIARAN_BOYLE wrote: »

I think the injustice they see is that social welfare recognises a relationship but revenue doesn't.


To which my response is that there's no benefit unless there's an obligation to support your partner. A couple recognised by social welfare could split up tomorrow and quickly be entitled to social welfare without counting towards each others means test. A couple recognised for tax purposes could split up tomorrow and remain access to each others tax credits as they remain reliant on each other financially.

I think this is correct. There's actually two factors at work here.

The first is the one you point to. There's a distinction between the issue of whether A is actually maintained by B (or partly maintained by and the issue of whether A is entitled to be maintained/partly maintained by B. In some contexts one of these issues is the relevant one; in other circumstances it may be other issue that is more relevant.

The second is that a couple decides whether or not to seek recognition of their relationship having regard to their own interests. But even if the couple decide not to seek recognition, the community at large (acting through the state) may decide to accord recognition anyway - not in the interests of the couple, but in the interests of the wider community.

In the social welfare context, the community obviously has an interest in not paying benefits to people who don't need them. If in fact A is supporting B fincially or materially (either by sharing income with them or by sharing other resources, such as a home) then that's obviously a relevant factor when deciding how much support B needs from the state. In that context, whether A and B are married is not that important.

But in the incomet tax context, A and B are not looking for money from the state; rather, it's the other way around. In the tax context, how A spends his or her earnings is generally irrelevant; you can't get a tax deduction or a tax benefit on the basis that you are giving some of your income to your friend B, and therefore shouldn't have to pay tax on it. You only get a tax deduction if you have a legal obligation to support B out of your income, which is of course the case if you are married to B.

If A and B are a committed conjugal couple but are unmarried, they may consider that they have a moral obligation to support one another. But, by choosing not to marry, they have chosen not to seek societal, official, administrative recognition of that obligation, and the fact that that it is disregarded for tax purposes is an outcome of that choice.

tiredblondie

CIARAN_BOYLE wrote: »

I think the injustice they see is that social welfare recognises a relationship but revenue doesn't.


To which my response is that there's no benefit unless there's an obligation to support your partner. A couple recognised by social welfare could split up tomorrow and quickly be entitled to social welfare without counting towards each others means test. A couple recognised for tax purposes could split up tomorrow and remain access to each others tax credits as they remain reliant on each other financially.

That's my point...thank you for making it clearer than I did 😊

Mrs OBumble

Peregrinus wrote: »

Il

If A and B are a committed conjugal couple but are unmarried, they may consider that they have a moral obligation to support one another. But, by choosing not to marry, they have chosen not to seek societal, official, administrative recognition of that obligation, and the fact that that it is disregarded for tax purposes is an outcome of that choice.

Its not that they MAY choose : they are forced to do so because of the unemployed one's lack of access to income support. ( its not like an unemployed person with no income can just move out easily - no landlord will accept them as a tenant!).

Many straight couples choose not to maery because they reject the patriarchial nature of marriage not because they are unwilling to commit.

CIARAN_BOYLE

Mrs OBumble wrote: »

Peregrinus wrote: »

Il

If A and B are a committed conjugal couple but are unmarried, they may consider that they have a moral obligation to support one another.  But, by choosing not to marry, they have chosen not to seek societal, official, administrative recognition of that obligation, and the fact that that it is disregarded for tax purposes is an outcome of that choice.

Its not that they MAY choose :  they are forced to do so because of the unemployed one's lack of access to income support.  ( its not like an unemployed person with no income can just move out easily - no landlord will accept them as a tenant!).

Many straight couples choose not to maery because they reject the patriarchial nature of marriage not because they are unwilling to commit.

Well unfortunately a marriage is the only relationship that obligates the couple to support each other financially.
Without an obligation you don't get any benefits from the state. If you choose to live together you are seen as choosing to support each other. While it would be difficult for one party to move out they would be able to claim full access to social welfare immediately.
Theres only one relationship that counts as a commitment and couples are refusing it because of the 'patriarchial nature of marriage'. Well I don't know what the 'patriarchial nature of marriage' is but well done on your decision.

Peregrinus

Mrs OBumble wrote: »

Its not that they MAY choose : they are forced to do so because of the unemployed one's lack of access to income support. ( its not like an unemployed person with no income can just move out easily - no landlord will accept them as a tenant!).

I’m not sure I follow you here. The very existence of choice forces us to make a choice. As Sartre points out, refusal to make a choice is itself a choice.

The cohabiting couple are free to marry or not to marry. If they don’t marry, that’s a choice to remain unmarried. The only way not to force them to a choice is to offer them no choice; to treat all cohabitants as married, regardless of whether they are or not. (Or to treat them all as unmarried, of course.)

Mrs OBumble wrote: »

Many straight couples choose not to maery because they reject the patriarchial nature of marriage not because they are unwilling to commit.

I don’t think their reasons for choosing not to marry are relevant. If their reasons are good enough for them, that’s all that matters.

But if you choose not to marry because you see the institution as patriarchal, it is hardly consistent to demand that wider society treat you as married. What could be more patriarchal and controlling than having your choice ignored, and being treated as if you had made the choice that other people who presume they know better than you do think you should have made, rather than the choice you actually made?

sandypas76

nompere wrote: »

In 2011:
The pattern here is that a one-person household has one credit of €1,650 and a multi-person household has (in effect) two credits of €1,650.

I don't see anything unfair in this..

The difference is not in the total amount of credits.
It is in the fact that a married couple can pass their credits to each other whereas two cohabiting people cannot share their individual tax credits.

When I was with my ex-husband, my weekly earnings from the job I had then were lower than my tax credits, so I passed my unused tax credits to him and so he paid less tax.
You cannot do that towards a partner you're cohabiting with.

Peregrinus

sandypas76 wrote: »

The difference is not in the total amount of credits.
It is in the fact that a married couple can pass their credits to each other whereas two cohabiting people cannot share their individual tax credits.

When I was with my ex-husband, my weekly earnings from the job I had then were lower than my tax credits, so I passed my unused tax credits to him and so he paid less tax.
You cannot do that towards a partner you're cohabiting with.

Yes, but the justification for that is that the married couple have made a formal commitment to support one another financially, and indeed are obliged to so so even one of them decides it not such a good idea after all. Their tax treatment reflects their mutual financial commitments.

The cohabiting couple have made no such commitment, so their tax treatment doesn't recognise any obligation to support one another. As a result they can't pool their income and credits in the way that a married couple can. They are taxed independently because they're finances are more independent.

Colser

Peregrinus wrote: »

Yes, but the justification for that is that the married couple have made a formal commitment to support one another financially, and indeed are obliged to so so even one of them decides it not such a good idea after all. Their tax treatment reflects their mutual financial commitments.

The cohabiting couple have made no such commitment, so their tax treatment doesn't recognise any obligation to support one another. As a result they can't pool their income and credits in the way that a married couple can. They are taxed independently because they're finances are more independent.

Yet if a cohabiting couple were to apply for any social welfare payment they are treated as a couple..so it's not a fair system at all.it's a lose lose situation if you don't sign that bit of paper.

sandypas76

Peregrinus wrote: »

Yes, but the justification for that is that the married couple have made a formal commitment to support one another financially, and indeed are obliged to so so even one of them decides it not such a good idea after all. Their tax treatment reflects their mutual financial commitments.

The cohabiting couple have made no such commitment, so their tax treatment doesn't recognise any obligation to support one another. As a result they can't pool their income and credits in the way that a married couple can. They are taxed independently because they're finances are more independent.

Hi, I'm not commenting on that. That's fine.
I was commenting on nompere's observation that the credits allocated to a married couple and to 2 single individuals living together are the same amount. I just pointed out that the total amount is the same but how you manage it is not. You are explaining the rationale behind it, thus complementing my observation, but I wasn't focusing on the rationale to be honest.

myshirt

The reality is that if you have been cohabiting long enough, you may as well be married, because you still have to support your partner post breakup.

People still forgetting this.

Peregrinus

Colser wrote: »

Yet if a cohabiting couple were to apply for any social welfare payment they are treated as a couple..so it's not a fair system at all.it's a lose lose situation if you don't sign that bit of paper.

Yes, but the social welfare system works by looking at the needs of the claimant - if you are in fact being supported by someone else, that's something they will take into account in assessing your needs. Whether that other person is obliged to support you or not is irrelevant; all that matters is that they do.

Whereas the tax system looks at the obligations of the taxpayer. If I choose to give a large chunk of my income to someone else, I don't get a tax deduction for that. It's my income; how I spend it is my affair but (mostly) I don't get a tax deduction base on my spending. (There are exceptions, obviously - mortgage interest relief, charitable donations, etc.) Married couples get favourable tax treatment not because they do support one another, but because they have accepted an obligation to do so.

Peregrinus

myshirt wrote: »

The reality is that if you have been cohabiting long enough, you may as well be married, because you still have to support your partner post breakup.

Yes, and when you reach the point of having a maintenance order made against you, you can have the maintenance deducted from your income for tax purposes (and added to you partner's income) because now you are obliged to support your ex-partner. But while you're doing so voluntarily, as a choice, without having accepted any obligation or made any commitment, that's just your personal choice about how to spend your money, and you don't get a tax deduction for it.

Screwballs

Follow up question - if a co-habiting couple do marry, can they revise the tax implications for the previous years or just from that year forward.?

ie can the claim tax credits for the previous 4 years or no?

2ndcoming

Screwballs wrote: »

Follow up question - if a co-habiting couple do marry, can they revise the tax implications for the previous years or just from that year forward.?

ie can the claim tax credits for the previous 4 years or no?

No, they are only treated as married from their date of marriage on.

amtc

2ndcoming wrote: »

Screwballs wrote: »

Follow up question - if a co-habiting couple do marry, can they revise the tax implications for the previous years or just from that year forward.?

ie can the claim tax credits for the previous 4 years or no?

No, they are only treated as married from their date of marriage on.

That's like saying can I get tax credits for the man I haven't yet met!

corklad32

Hi guys

I'll give a quick overview of my situation. I have rung a number of solicitors and none of them are specialists in the area as far as i can see.

I'm living with my partner for the last 10 years in an apartment. I pay the mortgage on the apartment and the apartment is solely in my name.
I have a life insurance policy and small amount of savings. I want to make a will but i don't want my partner who i will leave everything to to be liable for tax. Is there any way apart from marriage to avoid this scenario?

I understand i can make a will and leave everything but in the current setup tax will need to be paid on the savings, apartment and life insurance. Surely there must be some other option? OR if anyone knew a solicitor that specialises in such matters in the Cork area would be great

Thanks

CIARAN_BOYLE

no other way.

Peregrinus

This is what marriage is for, basically.

If there are reasons why you cannot marry, then a solicitor/tax adviser may be able to help you and your partner devise and implement strategies which minimise, or at least reduce, the tax hit is your partner surivives you. But it's very unlikely that they will be anything like as effective as actually marrying, if you are in a position to do that.

Squatter

corklad32 wrote: »

Surely there must be some other option?

Of course there is! You just need to think outside the box; how about legally adopting your partner and then writing a will that leaves your worldly goods to him/her as your sprog!

(Mind you, in that situation you'd need to ensure that you're not risking a prosecution for incest; it might be advisable to ask a solicitor for advice about that!)


Let us know how you get on!

No other way, nor should there be. The very simple ready made solution to this is marriage and giving similar legal standing outside of marriage just erodes marriage which should not happen.

mkdon05

Look into a section 72 policy. Your partner can pay the tax liabilities from it. Although the premiums you pay now may be high, depending on age health.

You could also invest some of you money in Irish government stock. You partner would be able to use the par value of the stock to settle CAT liability.

Of course the most tax effective way to deal wit this would be to marry. You can just do the legal end of it. No need for a wedding.

MayoSalmon

Owen Panicky Forehand wrote: »

No other way, nor should there be. The very simple ready made solution to this is marriage and giving similar legal standing outside of marriage just erodes marriage which should not happen.

Marriage is a financial commitment, which is exactly the same thing many couples are doing co-habiting so not sure what there is to be eroded?!

A family is a family no matter what legal title you put on it.

Peregrinus

MayoSalmon wrote: »

Marriage is a financial commitment, which is exactly the same thing many couples are doing co-habiting so not sure what there is to be eroded?!

A family is a family no matter what legal title you put on it.

The difference is that marriage involves a public commitment, made in a way intended to engage the acceptance and support of the community at large. Whereas the whatever commitments are made between a cohabiting couple are private to themselves; they haven't sought recognition from the wider community.

Hence, the tax system recognises that married couples have made public, enforceable commitments to mutual financial support, and their tax treatment is adjusted to reflect that they have these obligations. The tax system can't know whether a cohabiting couple have made similar commitments to one another, or whether they see their financial relationship in a different way. All it knows is that they have chosen not to seek official, administrative, etc recognition of their relationship.

MayoSalmon

Peregrinus wrote: »

The difference is that marriage involves a public commitment, made in a way intended to engage the acceptance and support of the community at large. Whereas the whatever commitments are made between a cohabiting couple are private to themselves; they haven't sought recognition from the wider community.

Hence, the tax system recognises that married couples have made public, enforceable commitments to mutual financial support, and their tax treatment is adjusted to reflect that they have these obligations. The tax system can't know whether a cohabiting couple have made similar commitments to one another, or whether they see their financial relationship in a different way. All it knows is that they have chosen not to seek official, administrative, etc recognition of their relationship.

I understand all that however my question is how marriage will somehow be eroded if other instruments were to be used for co-habiting couples for tax purposes.

A public commitment of sorts can be concocted for co-habitants.

Never going to happen I know but in theory couples could sign a legally binding declaration that says for the next 3/5 years or whatever amount of time please treat us the same as married couples.

the contract would be legally enforceable and the couple have committed themselves to mutual financial support etc etc.

Marriage is really something from yester year.

Two people make a financial commitment to each other get them to sign it and away you go. Let them renew that commitment just the same way a company renews its contracts etc.

CIARAN_BOYLE

Marriage is a lifetime commitment. even when there's separation you can still be on the hook to support the other party.


marriage is a give and take. if you want benefits take the responsibility in a permanent manner.

Colser

CIARAN_BOYLE wrote: »

Marriage is a lifetime commitment. even when there's separation you can still be on the hook to support the other party.


marriage is a give and take. if you want benefits take the responsibility in a permanent manner.

A cohabiting couple can't take advantage of tax credits associated with marriage yet if either of them are out sick from work the other partners earnings are taken into consideration re. sick benefit..very unfair situation imo.Lots of other examples also eg next of kin,assets in the event of a death etc.

Peregrinus

Colser wrote: »

A cohabiting couple can't take advantage of tax credits associated with marriage yet if either of them are out sick from work the other partners earnings are taken into consideration re. sick benefit..very unfair situation imo.Lots of other examples also eg next of kin,assets in the event of a death etc.

Yes, I know, but in every case that's because the cohabiting couple have made the decision not to seek public acceptance, recognition, support, etc of their relationship but to keep it a private matter between themselves. You can't make that choice and then complain that your relationship is not being recognised.

Peregrinus

MayoSalmon wrote: »

I understand all that however my question is how marriage will somehow be eroded if other instruments were to be used for co-habiting couples for tax purposes.

A public commitment of sorts can be concocted for co-habitants.

Never going to happen I know but in theory couples could sign a legally binding declaration that says for the next 3/5 years or whatever amount of time please treat us the same as married couples.

the contract would be legally enforceable and the couple have committed themselves to mutual financial support etc etc.

Marriage is really something from yester year.

Two people make a financial commitment to each other get them to sign it and away you go. Let them renew that commitment just the same way a company renews its contracts etc.

That's a different commitment, though. It's a short-term commitment that either party can walk away from when it expires. There's no reason why that should attract the same treatment as an indefinite commitment that can only be dissolved by death, or by court proceedings.

The correct analogy for marriage isn't with a company making contracts with its suppliers. A better analogy - though it's still not terribly good - is the relationship between a company and its shareholders. That lasts until the company is dissolved; you can't walk away from it just because it has ceased to be convenient or advantageous.

For what it's worth, most of these alternatives-to-marriage have been developed as a device to avoid or defer marriage equality - they are seen as a mechanism for dealing with the realities of same-sex relationships while denying them the symbolic significance of have their relationship termed a "marriage". In initially they tended to have more limited rights - civil partners might not be permitted to adopt, for example, or they might not have the same rights to sponsor their partners for migration purposes - but, over time, these differences tended to be eroded, and they tended to become functionally more and more like marriage, while still being denied the name.

Once you get to the point of recognising same-sex marriage, these marriages-in-all-but-name no longer have any purpose. The only reason to have any kind of civil partner/civil union/civil solidarity pact status that is distinct from marriage is if it is, in fact, materially different from marriage in the way that it works - e.g. if it's temporary, or if it's non-exclusive. But if it is different from marriage, then the case for saying that it should be treated for tax, inheritance, etc purpose as though it were a marriage is not very strong. The whole point of having it is that it's not a marriage.

Colser

Peregrinus wrote: »

Yes, I know, but in every case that's because the cohabiting couple have made the decision not to seek public acceptance, recognition, support, etc of their relationship but to keep it a private matter between themselves. You can't make that choice and then complain that your relationship is not being recognised.

If we can't avail of the benefits of being married then we shouldn't be penalised on for cohabiting when making a claim if sick etc.It's totally unfair to be considered as a couple for certain reasons and not for others.I'm surprised someone hasn't challenged this legally as so many couples are together years but haven't signed that piece of paper.