The tax consequences of marriage, support of a family, and divorce reflect how we choose to apply the basic principles that we tax income once and only once and that expenditures for personal consumption are not deductible. Taxpayer chooses whether to have a spouse or a child, so expenditures for the support of a spouse or a child presumably are not deductible. The Supreme Court’s decision in Poe v. Seaborn assured that the legal ownership of income within a family unit would be an important issue. We consider now the extent to which we recognize the family as a taxpaying unit.
The Tax Formula
➔MINUS § 62 deductions
EQUALS (adjusted gross income (AGI))
MINUS (standard deduction or
➔MINUS (personal exemptions)
EQUALS (taxable income)
Compute income tax liability from tables in § 1 (indexed for inflation)
MINUS (credits against tax)
We already know that the filing status “married filing jointly” implies that married persons are in fact one taxpaying unit, whether one or both contribute to its taxable income. The fact that a taxpayer provides financial support to another person may give that other person the tax status of “dependent” and entitle taxpayer to a dependent deduction. We learn shortly that whether taxpayer may claim another as a dependent usually turns on the existence of a family relationship.
The definition of “marriage” is a matter of state law; states law determines who is and who is not married. State law also defines the rights that husband and wife have with respect to their property and income before, within, and after the marriage. State law governs adoptions and so is determinative of who is a “child” of the taxpayer. State (or local) law also governs the placement of foster children. State law defines the obligations that family members have towards each other – notably that parents have obligations of support for their children up to a certain age. This may affect whether one person is a dependent of a taxpayer.
We consider here the tax ramifications of marriage and family – before, during, and after.