Top Financial Benefits of Marriage You Need To Know
When you said, "I do," you probably weren't thinking of the financial benefits of marriage, but there are plenty to consider.
Joining hands in marriage means joining finances and potentially taking advantage of tax benefits, joint income, and more favorable opportunities to save money for retirement and other long-term goals.
The Top Financial Benefits of Marriage
Whether you've already married or are considering it, here are the top financial benefits of marriage.
*This article is for general, educational purposes. Nothing said here should be construed as investment, tax, or legal advice. Consult the relevant professional to understand your personal situation and available options.
Tax Advantages
Married couples can file taxes jointly, making them eligible for certain tax credits and deductions, such as the child tax credit, which they may not get if they file separately.
Married couples may also benefit from the higher income thresholds before the tax bracket increases. In fact, the tax brackets exactly double in size for couples with under ~$693,000 of household income (2023 amount), meaning filing jointly would either save them money or at worst keep their tax burden the same, all else equal.
For example, a single filer is in the 22% tax bracket with income between $44,726 and $95,375, whereas married filing jointly couples don't hit the 22% bracket until they make $89,451 according to 2023 tax brackets.
Not only do couples get more tax deductions and possibly a lower tax bracket, but couples filing jointly also have higher exclusion thresholds for income, such as capital gains on the sale of their primary home.
Single filers can exclude the first $250,000 in capital gains on a primary residence, whereas married couples can exclude $500,000, so the exclusion doubles when you are married.
Social Security Benefits
Married couples also typically have more opportunities when claiming Social Security benefits, especially when one spouse earns more than the other or only one spouse works.
The non-working or lower-income spouse can collect an amount based on the higher-income spouse's earnings, earning as much as 50% of the primary insurance amount. This does not affect the higher-income spouse’s Social Security benefits.
In addition, you can collect your spouse's benefit if one spouse dies and their benefits are higher than their own. This helps alleviate financial strain after the death of a spouse.
If you are currently divorced but previously were married for at least ten years, you may be able to collect an amount based on your ex-spouse's income from the Social Security Administration. This does not affect your ex-spouse’s Social Security benefits.
Health Insurance and Employee Benefits
Another benefit of marriage that doesn't involve taxes or Social Security benefits is the health insurance benefits you may get.
You may have more options for health insurance if both partners work, allowing you to compare which has the lowest premiums and deductibles while providing the best coverage.
Spouses can sometimes take advantage of employee benefits, depending on the employer.
For example, some employers may offer life insurance for the employee and their spouse or other benefits extending to the spouse, such as tuition assistance, relocation expense coverage, or inclusion in company events.
Retirement and Estate Planning
Retirement and estate planning are other areas in which married couples benefit. This is most beneficial for spouses who do not work but can contribute to a Spousal IRA.
This is a retirement account that allows a working spouse to contribute to an IRA in the name of a non-working spouse. This enables couples to increase their retirement savings and take advantage of compound interest.
In addition, spouses can inherit one another's retirement plans without incurring tax liabilities. This includes Individual Retirement Accounts and company-sponsored 401Ks.
Shared Living Expenses
While it might seem more expensive to get married since there are two people to cover living expenses for, the costs are often more affordable.
For example, if both spouses work and you have only one mortgage, you spend less on housing and utilities than you would if you lived separately.
For example, let's say you and your spouse have a mortgage of $2,000 on the house you live in together, but before you married, you each owned a house with a $1,500 mortgage payment, for a total of $3,000. You'd save $1,000 a month just by sharing this expense and house.
You also share virtually most other living expenses, such as groceries, insurance, streaming subscriptions, transportation, and any other costs your household incurs.
Credit and Loans
It's often easier for married couples to qualify for loans, such as a mortgage or auto loan, when there are two incomes and two credit histories. If both partners have great credit and solid income, you may be eligible for better loan rates and terms or even qualify for larger loan amounts.
If one partner has bad credit, there are still advantages, especially if the other spouse has great credit. The spouse with the lower credit scores may still be able to get financing, such as a mortgage, if you apply in the other spouse's name, leaving the spouse with bad credit off the loan.
Maximizing Financial Advantages
To maximize the financial benefit of marriage, it's best to work with a financial professional who can help you determine any tax benefits or penalties from filing jointly.
Married couples may choose to file as “Married Filing Separately” if it benefits them, but this situation is rare, according to Nolo, who states that 95% of married couples file jointly.
A financial professional can also help you with financial planning as a team. Together, you can determine how to maximize your retirement plans, set up your estate, share living expenses, and qualify for the best loan rates and terms.
FAQs
What Are the Financial Cons of Marriage?
While there are many financial benefits of being married, there are also some financial cons to consider, especially if you are both high-income earners, which could push more of your income into a higher tax bracket. Other considerations include:
Higher car insurance premiums due to multiple drivers in the house
Potential risk for increased debt and/or damage to your credit score due to a spouse's poor credit habits
Higher student loan payments if both partners work and you are on an income-based repayment plan
Are There Any Financial Benefits of Getting Married Young?
Marrying young gives you the added benefit of taking advantage of tax breaks and sharing living expenses early.
This may allow you to have more money to save, leading to higher wealth accumulation at a younger age. This assumes, of course, that you work with a financial professional and have a plan for your money, even if neither of you is at the top of your career yet.
Is Marrying for Money Worth It?
Money is just one part of a marriage, and whether you decide to get married or not is a personal decision. While you shouldn't base your decision solely on money, it can play a role, especially if you'll benefit financially and have an emotional connection.
For example, if you can get better/cheaper insurance coverage and tax breaks and share your living expenses, you may find that marrying for money is worth it, but just marrying for money without an emotional connection isn't usually a good idea.
Will Getting Married Save Me Money?
You might save money by filing a joint tax return, but there's no guarantee. It's best to work with a licensed professional to determine if you'll save money on taxes.
Other areas where you may save money include living expenses and large assets, such as a house or car, if you share the cost and monthly payments.
What Benefits Will I Lose if I Get Divorced?
Getting divorced causes more than emotional trauma; it could also cause you to lose certain financial benefits, such as health insurance, some Social Security benefits, tax breaks, and potential retirement benefits.
Each situation is different, and you may not know what you will lose or gain until you go to court.
Long-Term Financial Planning as a Team
Getting married is a big decision that greatly affects your financial life.
It's important to understand the tax and other financial benefits of getting married while also ensuring you take advantage of the opportunities offered to you to ensure financial security.
If you're interested in getting professional help to ensure you and your spouse are on the same page financially, contact me today for a free consultation.