Common law marriage and taxes

For people who live in a common-law marriage, there are likely a lot of questions about what that means for tax purposes. Common law marriages are distinctly different from formal legal ones, after all, so it is often unclear how these people should file.

Let’s take a closer look at what common-law marriage means legally, and what the implications are for people in common-law marriages when it comes to filling out their taxes.

What is a common law marriage?

We should start by defining what common law marriage is in general. Not every situation in which people live together can be considered a common law marriage, of course, because that would be too subjective and people would simply be able to claim the status at will. Common law marriages are ones that fulfill the following criteria:

  • A couple lives in a state where common law marriages are recognized (we will discuss this further below)
  • The couple has lived together for a significant period of time without a break. This should mean several years, at least.
  • They should act as a couple when interacting with other people. In other words, when they are among friends or colleagues, they should introduce themselves accordingly and refer to each other as spouses.
  • They should share finances, including bank accounts, leases, credit cards, etc.

What about last names?

It is possible to change your last name in a common-law marriage. If you wish to do this, you have to petition a court to allow you to do so. However – as with the issue of legality and consequently tax filing ability in general – this varies state by state. 

If you are able to change your last name in a common law marriage, the change should apply to all of the things that you use it for, including your Social Security status, your driver’s license and other related forms of identification, bank accounts, etc.

If you manage to do this successfully, you will receive a name change document. This document will be important for carrying out other official activities, including filing taxes.

What benefits does common law status give you?

The other major question is why you would want to file under this status at all. To some people, it might not be clear exactly which benefits common law status affords people. While there may be some variance in benefits, in general, you should expect the following:

  • You will be able to file your tax returns either as married filing jointly or as married filing separately.
  • You will be eligible for marital exemptions for your estate in the amount that is legal for the federal estate tax limit. This includes exemptions for your estate. You can also claim deductions on your mortgage interest if you have a shared house.
  • You will be eligible for exemptions related to your children if you have them as a legally married couple would.
  • You will have Social Security survivor status. This is important because if one spouse dies, he or she will want any Social Security benefits to go to the right person. These benefits can offer up to 50% of a retired worker’s monthly benefit to the designated beneficiary.
  • You will receive insurance benefits. Just as in marriage, insurance benefits should be shared, and a surviving common-law spouse should be eligible for the same benefits that a legal spouse would be eligible for.
  • You will receive other pension benefits and benefits related to your common-law spouse’s assets. If one partner has other types of pension benefits, a 401(k) plan, or an IRA, that person should have the right to transfer benefits to a common-law spouse. And this goes for other types of assets, as well, such as stock holdings or bonds.

Is common law marriage universal?

Unfortunately, as with many policies in the US, whether or not common law is recognized is dependent upon individual states. Only Alabama, Colorado, Iowa, Kansas, Montana, New Hampshire, Oklahoma, Rhode Island, South Carolina, Texas, and the District of Columbia recognize common law marriage as a distinct thing. If you live in another state, unless you are legally married you are simply considered single filers for tax purposes.

Some states have changed

There are a few nuances. There are states that have changed their policies, and for which filers who entered into common law marriage before a certain date are considered legitimate. Pennsylvania is one of these states. Others still will recognize common law marriages in other states but not their own. 

What about same-sex marriage?

There is also the question of same-sex marriage and its legality. This is another gray area that, while legal on a federal level, does not necessarily apply in every state. As of 2015, the Supreme Court legalized same-sex marriage across the country. However, the legality in any given state depends on the laws of that state.

How does the status of being divorced apply to common-law marriages?

The process of getting divorced is the same regardless of what type of marriage you are in. Regardless of whether you are in a common law marriage or a standard one, you must file for divorce according to a standard court procedure. In this case, the court will decide questions of child support, spousal support, and the division of assets.

When it comes to your tax filing following a common law divorce, it will be similar to the filing of a divorced person from a standard marriage. However – as stated above – this is all dependent upon the legality of the state that you live in and whether or not that state recognized your common law marriage to begin with.

Be consistent

The one universal among states is that you need to be consistent in your tax filing. You cannot, for example, state that you are common law married for employment purposes, but then say that you are single when filing your dependents.

So if you do take this step, be sure to go over all your official documentation with your spouse and be sure that everything is clear and consistent.

Seek help if necessary

Common law marriage is complicated, and it often contains a lot of aspects that are not immediately clear to people. If you are in a relationship that you believe deserves to be recognized as a legitimate common-law marriage and you live in a state that allows for this, you might want to talk to a lawyer. It could definitely be to your benefit to file this way because there are a lot of tax privileges that you could gain from being in a common-law marriage.

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