There’s a great Aziz Ansari bit where he roleplays as the first person ever to sell the concept of marriage.
“What’s that?”
“It’s a cake with two tiny dolls that look like us.”
“…why are we doing this?”
“Tax purposes.”
It’s hilarious and 100% true. In addition to cake and a lifetime of happiness, one of the other huge benefits of marriage is the bevy of financial perks. From tax breaks to Social Security benefits, cheaper car insurance to better health coverage, the world of money favors marriage over common law.
So, what are the benefits you’ll get after legally tying the knot? Are there any money-related downsides to getting married? And how can you and your partner avoid those?
Let’s dive into the financial benefits of marriage!
1.Social Security benefits
In terms of dollars and cents, the biggest benefit most couples will see is the potential spike in their social security benefits.
For starters, when you retire, you’ll now have the option of receiving either:
- 100% of your own Social Security benefits, or
- 50% of your partner’s.
That doesn’t mean you’d split your partner’s benefits down the middle — it means they get 100% and you get 50%. That’s a big deal for couples where one spouse makes significantly more money than the other.
Not to start off on a dark note, but if the worst should happen, marriage also entitles a widow or widower to up to 100% of their deceased partner’s remaining Social Security benefits.
Not a fun thought, I know, so let’s now segue into a much happier topic: taxes!
2.Tax breaks
The bond of marriage may also entitle you both to some sweet, sweet tax breaks.
Now, to set proper expectations, let’s bust a common myth together. Marriage doesn’t always translate to lower taxes for both parties. It does most of the time, but not always.
A case in which it doesn’t help is if you and your partner both make so much money that filing jointly actually catapults you both into a higher tax bracket (e.g., 32% when filing jointly, 24% when filing separately). They call this the “marriage tax” and it’s something to watch out for if you both make six figures.
But for the most part, married folks enjoy more tax benefits than drawbacks:
- If you have substantially different incomes (e.g., $50k vs $150k), joint filing can actually pull the higher-earning spouse into a lower tax bracket
- You may both qualify for additional credits and itemized deductions
- You’ll have access to a larger charitable contribution deduction
- If one spouse has a job and one doesn’t, the latter can still contribute to an IRA with joint income
While filing jointly with a spouse can save you big on taxes, it can also be a complicated process that might call for professional help. Plus, filing jointly means you 100% trust your partner’s honesty, attention to detail, and accurate record-keeping.
3.Cheaper car insurance
What do insurance companies and nosy relatives have in common?
They both love asking if you’re married yet!
While I can’t speak for any prying relatives, insurance companies love asking this question because it can greatly impact your premiums. On average, married people save between 4% and 10% on their car insurance.
Believe it or not, it all comes down to the fact that insurance companies think married people drive better. Industry insiders at CarInsurance.com say the carriers might’ve gotten this idea from a 2004 study that found single drivers suffered accident-related injuries at twice the rate of married drivers.
Now, all that being said, you might still discover your quotes go up after naming your spouse. That can happen if your spouse has a worse driving record than you. If that happens, you can add a named-driver exclusion on your policy. This keeps your rates down, but also means your insurance won’t apply when your spouse drives your car.
Read more: 6 ways to save on auto insurance
4.Cheaper health insurance
In most cases, being married means you can now access each other’s employer-sponsored health insurance plans. So if you pay $500/month for mediocre coverage and your partner pays $300 for way better coverage, you can hop on over to their plan as soon as 60 days after you tie the knot.
This is an especially big deal for married couples where one partner is a salaried W-2 employee and the other is 1099/freelance/self-employed. Most employee-sponsored plans are superior in cost and coverage to the equivalent plan on Healthcare.gov.
5.Keep more of your home’s sale price
Here’s another common myth busted: being married doesn’t help you buy a house.
That’s because mortgage lenders don’t really care if you’re married to the person you’re buying the house with. Lenders only care about the income, credit score, and assets of the people on the application. You could buy a house with your spouse, your best friend, or Patton Oswalt if you wanted to; it’s all the same to the lender underwriting the loan.
But marital status does make a difference when you sell the house.
When you sell a house, you’ll (hopefully) end up with a profit. That’s your selling price minus your closing costs, selling costs, and your tax basis in the property.
What’s left over is considered “capital gains” and can be taxed — sometimes at a very high rate.
Now, if you’re single and sell a house, you can exclude up to $250,000 of the profits from capital gains taxes. If you’re married, that number jumps to $500,000. So, if you two sell a house at a big profit, you could pay tens of thousands less in taxes than you would as single people!
6.Retirement perks
Marriage also comes with a cornucopia of retirement-related perks.
For starters, and as mentioned above, marriage lets an unemployed spouse keep contributing to an IRA using joint income. That can be a big deal to help stay-at-home parents stay on track for a financially independent retirement.
In addition, by law, a surviving spouse is automatically the beneficiary of a deceased spouse’s 401(k). That’s thanks to the Employment Retirement Income Security Act of 1974. The only exception is if the spouse has listed an alternative beneficiary in their 401(k) paperwork — but such changes require the consent of the other spouse.
There’s something similar for pension plans. Under federal law, any married person’s pension plan must be set up with a survivorship benefit, which usually translates to the surviving spouse receiving half or more of the deceased spouse’s monthly benefits for the rest of their life.
In short, once you’re ready for some post-honeymoon adulting, it might be worth shooting an email to HR to ensure your 401(k) and pension plan are set up to benefit your spouse.
7.You can “gift split” and save on taxes later in life
The IRS defines a gift as property given by one individual to another while receiving nothing, or less than full value, in return.
So, basically, a gift.
But the reason the IRS has a clear-cut definition of gifts is because if you give away too much, they’ll start taxing it.
Each year, an individual can give away up to $16,000 worth of property and cash without the IRS caring. Every dollar more than that gets added to a lifetime total. Once your lifetime total hits $5million (the new number going into effect in 2026), the IRS starts taxing all your gifts by up to 40%.
Thankfully, for married couples, the threshold you can “gift” each year without impacting your lifetime total doubles to $32,000.
Now, you might be thinking that you and your partner probably won’t be giving away $32,000 each year, let alone so much more than that that your “overage” tallies up to $5million.
But for couples who:
- Plan to frequently transfer property or cash between them, and/or
- Plan to have multiple children and cover their medical expenses/tuition,
gifts can add up quickly. You and your partner may find that when it’s time for inheritance planning, you’ve already reached $4million in “overage” and if you leave your kids $2million, $1million of that could be taxed out the wazoo.
That’s why that raised $32,000 annual gifting threshold is so important, and a major hidden benefit of marriage.
Are there any financial drawbacks to marriage?
For the most part, being married will help you save on taxes and bring a host of other financial benefits.
However, if you’re not careful, marriage could complicate a few things. Thankfully, all of these are avoidable if you see them coming and plan accordingly.
1. Filing jointly could launch you into a higher tax bracket
As mentioned, combining your incomes on your taxes could launch you both into a higher tax bracket and cost you thousands.
Thankfully, this can be avoided by doing some simple math.
2. Filing jointly could raise your student loan payments
If you or your spouse is on an income-based student loan repayment plan, your lender could use the other spouse’s higher income as justification for raising your monthly payment.
The only way they’d get that information is by looking at a joint tax return, so you might want to consider filing separately — or moving to a fixed payment plan — until your student loans are paid off.
3. You could pay more for car insurance
Auto insurance companies assume that people who share a home also share their cars. Therefore, they’ll automatically add your partner as an approved, covered driver on your vehicle.
If you and your partner have similar driving records, your insurance provider won’t see adding them as higher risk. As a result, you should still enjoy the 4% to 10% marriage discount on premiums.
But if your partner has a worse driving record than you, being married could raise your premiums. You can lower them again by:
- Excluding them as a covered driver on your policy (meaning they’ll be driving your car uninsured)
- Waiting until their latest violation expires after three or five years, depending on the provider, or
- Follow our guide to saving on auto insurance to lower premiums across the board.
4. Your spouse’s credit could negatively impact your loan terms
When you apply for joint loans as a married couple (mortgages, auto loans, etc.), lenders will look at the “lower middle” of your credit scores.
For example, if your credit scores from the three credit bureaus are 720, 708, and 698 and your spouse’s are 600, 580, and 577, lenders will use 580. As a result, your partner’s imperfect credit could lead to less appealing loan terms (e.g., 15% interest instead of 4%).
Read more: Does marriage affect your credit score?
3 financial benefits couples can enjoy before getting married
Before wrapping up, I thought it was worth sharing three benefits you can enjoy as a couple before you get married, such as:
1. Better mortgage rates
I mentioned this above, but you don’t need to be married to jointly apply for a mortgage. Applying with someone who’s W-2 when you’re 1099 will greatly increase your chances of getting approved and combining your income will increase your buying power.
2. Opening a joint bank account
Likewise, you don’t need to be married to open a joint bank account and share finances more easily.
Do keep in mind, however, that divorce proceedings can help you recover your own funds from a joint bank account. But if you’re just common law (i.e., unmarried), there’s little you can do if your partner empties the account since it’s technically their money, too.
3. Hopping on your partner’s health insurance
Finally, some employee-sponsored health insurance plans don’t require you to be married to share benefits with your partners. Some allow for common law couples to hop on each other’s plan so long as they share the same address.
This could be a huge benefit to couples who share a key but haven’t tied the knot!
Summary
By and large, the world of finance smiles on married couples. Once you find “the one,” you have a bevy of personal finance benefits to look forward to.
That being said, it’s never too early to start the conversation about money with your partner. After all, money is the no.1 thing couples disagree about — but that doesn’t have to be y’all.
Read more:
- 5 tips for managing your finances with your significant other before marriage
- How much does an average wedding cost?
