Considering Whether to Say “I Do”? Financial and Tax Benefits of Marriage

Considering Whether to Say “I Do”? Financial and Tax Benefits of Marriage

“Should we get married for financial or tax purposes?” As financial planners, we get this question a lot more often than you might think! 

Although Valentine’s Day was last week, I like to think that we’ve played Cupid in a few situations. In fact, we’ve suggested to multiple long-term committed couples that they seriously consider marriage for one reason or another. And we’ve guided plenty more couples in their financial planning, whether they got married before becoming clients, wed during the course of our work together, or are planning the wedding as you read this. 

Of course, each of their situations is unique. But they’ve left me — a person who’s been in a committed relationship for over a decade — wondering whether I should talk to my partner about tying the knot. So partially out of self-interest but also knowing that others might be in the same swan-shaped loveboat, I’m digging into the financial benefits of marriage.

Wedding-Related Expenses

Making the choice to get married comes with costs — even if you’re “just” applying for a civil union or marriage license. (In case you’re wondering, those cost $30 here in Fort Collins.) But did you know that something as simple as filing your taxes with your significant other can be seen as a marriage equivalent in our state? 

Maybe that isn’t lost on you. The full term for filing jointly is married filing jointly, after all! But in addition to marriages and civil unions — the ones with official licenses filed with the county clerk — common-law marriage exists in the great state of Colorado. In fact, according to the Colorado Department of Revenue, common-law marriages have the same validity as any other marriage and can only end in divorce or death. Plus, couples can “solemnize” their own marriage or, in other words, perform their own wedding ceremony. 

What’s the cost of a common-law marriage, you ask? Free-fitty.

While it is definitely possible to get married in Colorado at low-to-no cost, many couples do want to spend on a ceremony and all of its accouterments. And, according to Bankrate, they plan to spend some cash on their wedding and reception — at around $30,000. Then there’s the honeymoon, averaging $5,100.

Financial and Tax Benefits of Marriage

After spending an average of $35,000 or so on wedding-related expenses, what are those financial perks? While this list isn’t all-inclusive like that honeymoon might be, let’s dig in!

Lifetime Benefits

Lower living expenses

Spousal IRA contribution opportunity

Higher HSA limit for family coverage

Saving money on insurance premiums

Access to either spouse’s health insurance

Enhanced borrowing and credit access with higher loan amounts

Eligibility for your spouse’s Social Security benefits

Ability to make health- and finance-related decisions for your spouse when they can’t

Doubling your annual gift tax exclusion

Tax-Specific Benefits

Filing one tax return (although two tax returns is an option when married filing separately)

Income tax breaks, especially when spouses have disparate incomes

Tax deductions through spousal traditional IRA contributions

Benefits at Death

A spouse is usually a “default” beneficiary, especially on joint property

Sidestepping the 5- or 10-year IRA withdrawal rules

Inheritance and estate tax breaks

Access to your spouse’s pension benefits as a survivor

Unmarried partners can take advantage of many, but certainly not all, of these through proper financial and estate planning. 

Financial Planning for Couples 

No matter the label attributed to your relationship, you and your significant other likely have some life and financial goals in mind. You might be enjoying life as an unmarried or engaged couple with no plans to wed. Maybe it’s time for you to bring your spouse or partner into your financial planning relationship with FPFoCo. Perhaps you’d like to add that wedding and honeymoon to your goals list. Or it could be that you’re ready to file one tax return with your partner as a single economic unit. 

Whatever the case, crafting a solid financial plan with your love can help ensure that you’re on the same page when it comes to your money — and that your future is intentionally planned, too. 

I’d be remiss if I didn’t point out that there’s nothing wrong with getting married for the tax benefits! If you’re considering marriage in any of its wonderful forms and would like to better understand the myriad financial implications — from estate and employee benefits to tax and expenses — find some time on my or Jason’s calendar.