Why Marriage Might Be Bad for Your Finances

by Miranda Marquit · 25 comments

A few decades ago, getting married was a chance for two people to better their financial fortunes as they started a family. In those days, it was easier to get by on a single income, and higher education (no matter your gender) wasn’t as essential as some think it is today. People married young so they could work together to improve their fortunes and set up house. Since 1996, the tax code has also provided tax bonuses for married couples with wide income disparities.

But the times are changing. The marriage age is increasing, and it’s now likely that both partners have some sort of education and career. As a result, marriage is no longer always in your best financial interest.

Tax Implications for High-Earning Couples

When you have high earners in a two-income household, the tax advantages of being married tend to disappear. Consider the 28 percent tax bracket for 2014. For a single person, that bracket spans $89,350 to $186,350. For those married filing jointly, that same tax bracket spans $148,850 to $226,850.

As you can see, it’s not a matter of simply multiplying the single income to get married income in a corresponding tax bracket. If you make $85,000 a year, you’d be in the 25 percent tax bracket as a single person. Get married to someone who makes the same amount that you do, and suddenly your combined income is $170,000 — putting you both in the 28 percent bracket.

If one of you makes a little bit more than the other, this can be an even bigger change. What if you make $89,000, but your partner makes $105,000? Now your combined income is $194,000. If you were both single, you’d be in the 25 percent bracket, and your partner in the 28 percent bracket. Now that you’re married, though, you’re both in the 33 percent bracket.

If you and your partner are both on the higher side of income earnings, you’ll find there’s not a tax advantage to marrying — and that you phase out more quickly for the use of certain tax deductions and credits.

Other Potential Financial Penalties

You also have to consider the impact that marriage might have on other aspects of your finances. Yes, you can reduce some of your expenses by sharing costs — but you also need to consider what happens if you and/or your partner have children.

Getting married can change the situation if you’ve previously qualified for financial aid for a college student, or if you’ve been taking advantage of government programs. Your new combined income might not be particularly high, but it might make your household income just high enough to take you out of the running for previously-used programs, which can lead to a budget squeeze each month.

You could also see increases in your insurance premiums for adding more covered people to your account, and if you have children, this will happen again when they start driving.

While there are some financial benefits to getting married, it’s important to carefully consider your own situation, and decide what’s best for you to succeed financially.

Do you think marriage has a positive or negative impact on personal finances?

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{ read the comments below or add one }

  • Ram says:

    If you and your spouse combine falls in the 28% bracket that means it split the 28% into 2, meaning you pay 14% and your spouse 14% instead of paying 25% solo. Both saving 11%.

    Being married you save a lots of money together and share lots of love as well. So Mrs Marquit get you math right.

  • Aldo R @ MDN says:

    Thanks for all the advice but like I said before, this is just a temporary situation. We don’t plan to have kids for the next two years so we’ll save our $4,000 a year to put it into buying a house. When the kids come then we could get married.

    A lot of people are engaged for years because they want to save money to have a grandiose wedding. We’re going to be engaged for years to save our money from Uncle Sam and invest it in a home. I think our idea is more sensible than spending $20,000 on a party, but maybe I’m wrong.

    • Amy K says:

      Excellent way to put it!

      My husband and I dated, then lived together, for years before we were married. We bought a house together, which prompted all sort of legal arrangements (wills, beneficiaries, power of attorney) that would have been automatic if we were married. For us, we just weren’t ready for the commitment, it wasn’t a financial decision.

      When we did get married I was suddenly without the ability to contribute to the Roth IRA because our combined income exceeded the limit. And we were paying more in taxes. I don’t remember the value of the tax impact, I was more upset about losing the IRA. On the upside, we did save in smaller ways: I was able to go on his health insurance, we put both cars on one auto insurance and got a multi-car discount, I was able to use perks he gets through his family. Small consolation, I know. The biggest perk is that we could have avoided some of the legal arrangements if we had been married when we bought the house. Something to consider when timing your paper-signing.

      Oh, and changing your name is a pain the the rear. If you’re both happy with her keeping her name, it will save a lot of hassle!

  • Marriage is not just a tax thing, there is a valuation and loyalty to each other that will be for life. The tax system today is not a marriage advantage, but it may change in a few years, and why not see it from another angle, the children in the family feel more security, etc.

    • David Ning says:

      I agree that getting marriage legally shouldn’t be based solely on economics, but I don’t believe children will actually know whether their parents legally married or not.

      If the parents don’t explicitly tell their kids, and it’s debatable whether they need to or not, then how will anyone else ever find out?

  • Kate says:

    If the only reason you are considering marriage is $$$$$$$$$$$$$$, then I say you ought to NOT get married. Because everything in life isn’t about money, boys and girls. If you love someone and he loves you, and neither of you owe back taxes or unpaid child support — or $100,000 worth of college loans — you shouldn’t even be dwelling on money into the coffer ringing. If you both have jobs and you can afford a place to live, transportation (public, bicycle or some kind of car), some kind of internet/cable package and your food and utility bills, you’ve got enough money to get started on. But by all means before you say I DO, make full disclosure of all the money each of you owes and that includes any back taxes or unpaid child support, or any pending paternity suits. Believe it or not, many girls are dazzled by curly hair and a guitar and later find out that Mr. Wonderful is in fact one step ahead of the law, when it’s too late to say Maybe Not.

    • David Ning says:

      Solid sensible advice Kate. If everybody would be open about their finances before they get married, there will be much fewer surprises and divorces down the road.

  • RustyGee says:

    A thought to add to the mix, how does Social Security, amounts that a spouse receives, become impacted by not being married or waiting to taxable incomes are lower?

    • David Ning says:

      With so many claiming strategies for yourself, spouse, plus possible ex-spouses as well as all the different tax brackets, state income tax treatments, and social security taxes paid that it’ll be impossible to list out every option.

      Adding SS into the equation just makes things clear as mud 🙂

  • Kathryn says:

    I believe you misunderstand how the tax brackets work. Bumping up your combined income does not mean that ALL of your income is taxed at the higher rate.
    Here are two links that explain it better than I can:
    http://www.thesimpledollar.com/dont-fear-the-higher-tax-bracket-or-why-a-reader-needs-more-cowbell/
    http://www.dailykos.com/story/2012/11/19/1163255/-Do-YOU-understand-how-tax-brackets-work#

    I’m not saying certain individuals may find it to their advantage to stay legally single, but it does appear you are misrepresenting the way taxes are determined.

    • David Ning says:

      Thanks for pointing out the country’s progressive tax system Kathryn. Though I don’t think Emily’s examples would be any different, it’s important for everyone to understand that not every dollar is taxed at the marginal tax bracket.

  • RustyGee says:

    Aldo
    I agree that this is a touchy subject. Look at the number who have responded. Take care.

    • David Ning says:

      You’re right RustyGee. This really is a pretty touchy subject but it’s a fascinating topic but if thinking about tax brackets get couples to discuss combined finances before they get married, then society would be so much better!

  • RustyGee says:

    Is so WRONG for not getting married, to save a tax burden and not pay taxes. I have a hard time understanding your logic Aldo@MDN because when the person declares you husband and wife, because you have obtained a marriage license, then you are legally married. The last time I knew, there are NO signatures required AFTER the ceremony, only the person presiding over the ceremony signs the certificate to make it official. If you have not checked with your local court system, that might be on your wedding preparation list .to stay single. My tax burden between filing single or married filing joint was not of any concern when I became married and we would work out our finances after we were married. If people do not get married because they are thinking about what they might owe the government in taxes, then this country is going down the tubes even more placing a value of monetary concern over morals. The question too is how many people fall into the income categories you reference? How many people are making $85,000 and marrying a person making the same amount? The median household income in the US is $50,502, which is well below the amounts that were used in the blog. IMO, this issue of not getting married to save tax money is not considered by many couples when they honestly in their hearts say “for richer or for poorer” (or words to that effect) and put morals over greed of money to save from paying taxes.

    Granted, our government is shafting us for having a higher income and being married; however, don’t look at what you have to pay taxes on to be married and live honorably with your spouse.

    Aldo@MDN, put me in the same category as your grandparents and get married.

    • Aldo @ MDN says:

      The post only applies to some people, not to everybody. It just happens that it applies to us and we don’t believe that we should pay $4,000 a year just to have a certificate. We will respect each other, love each other, and protect each other, therefore live honorably with each other. We don’t need a marriage license or certificate for that. Millions if not billions of people used to get married before just by saying I do, without having to go to court. Are you saying that those people are or were never married?

      In my State, you first have to go to City Hall and file for a marriage license – that’s when you actually get legally married – if we never go to court or city hall then we are not legally married. Also, if you get married in a different country but never apply for a license or certificate in the U.S. then we are not legally married in the U.S. There are many ways we can go about doing this.

      We can have a “destination” wedding and have a beautiful ceremony and just never apply for a license when we arrive back in the U.S. and nobody could ever tell me that she is not my wife.

      If it’s important to you to have that certificate, then by all means get it. To us, our love for each other is enough… certificate or not.

      • RustyGee says:

        Aldo@MDN
        To respond to this statement and question that you wrote; “Millions if not billions of people used to get married before just by saying I do, without having to go to court. Are you saying that those people are or were never married?” When my wife and I were married, we had to go to the county courthouse to apply for a marriage license to become legally married and, IMO, a couple is not married until they have fulfilled the requirements for the state. By saying “I do” to each other and agreeing to love, honor, protect, and respect each other is just a commitment without any legal issues. If you and your lady wish to go through the motions of a wedding ceremony then best wishes and good luck as you spend your lives together.

        • Aldo @ MDN says:

          I know this a touchy topic and by no mean I want to undermine marriage, especially since there are so many that are fighting to get this right – but this is just a temporary situation for us. We’ve calculated than in less than 5 years we would be in a higher tax bracket anyways and we will hopefully have kids by then so getting legally married then won’t make a difference in the taxes we pay. We’re just going to save those $4,000/year for the next 3-5 years.

          I don’t want to come off as if I don’t care about marriage; I care about it a whole lot. This is why we are going through the ceremony and exchanging vows and rings. We just don’t think being legally married in one country counts as much for us, that’s all.

          Thank you for the warm wishes.

          • Jones says:

            Though I understand not wanting to pay the government an extra $4K per year there is more to marriage than simply tax implications and I DON’T mean ooey-goey love either. The thing that came to mind first would be if one of you were hurt enough to be hospitalized ; neither could make health decisions for each other nor visit outside of normal visiting hours. Should one of you pass away (heaven forbid) the other can’t collect death benefits. Simple things like IRAs (where the spouse is normally the default beneficiary) becomes more difficult should something happen to each other.

            Part of the reason many are fighting for the right to be married is not simply the symbolic aspects but the practical ones as well. While you could lay much paperwork in place (and jump through a ridiculous amount of hoops) to avoid some of these potentially catastrophic events, in the end marriage can help smooth many of these.

          • David Ning says:

            Thanks for raising the point Jones. It would be tough to foresee all the potential complications of not legally getting married so it’s almost impossible to get the same benefits but just pay fewer dollars in taxes.

            Hopefully the bet works out for Aldo.

    • Linda says:

      I agree with the article. I live in a high cost of living area … Washington DC suburbs and there are a lot of people who make more than $85 around here and still can’t pay the rent. It’s wrong to be taxes more but sometimes $4,000 a year (or $300 a month) will make or break a couple.

  • Aldo @ MDN says:

    I’m so glad you wrote this post. I just got engaged and after running the numbers and going to a CPA for confirmation we decided that we are not going to get legally married. If we do, we would have to pay $4,000 more in taxes every year.

    Our grandparents don’t agree with this at all – they say marriage is bigger than money, which is true, but we are still going to get married. We’re going to have a ceremony and somebody is going to declare us husband and wife. We’re going to wear our rings and be truthful to each other forever and ever… we’re just not going to sign that little paper.

    We’ve also heard how we are taking for granted the sanctity of marriage, seeing that millions of people are fighting to get that right, which we also understand, but I’m not going to give Uncle Sam $4,000 extra just so for signing a paper. I’m still going to be married to her in my heart. No paper is going to change that.

    In a few years, when we have kids and are in a higher tax bracket, we’ll reconsider our tax situation and maybe we’ll finally sign that paper, but for now we’re keeping our money.

    • David Ning says:

      Thanks for sharing your story Aldo. Many people talk about the extra taxes, but this is the first time I’ve heard of someone actually not tie the knot legally because of the extra yearly cost.

      Just remember to revisit the situation continually as different tax brackets, deductions like kids etc all factor into what is ultimately the most financially beneficial.

    • Abigail says:

      Maybe I’m missing something. If it’s just an issue of taxes, why not just go married filing separately? Does one of you itemize?

      • David Ning says:

        You normally don’t get the same benefits by merely filing separately Abigail. It’s a tough decision, but many people are better off financially without officially tying the knot.

    • lbk says:

      I fully understand. My husband and I had to make that decision as well last yr. We thought we were facing an extra $10K each year in taxes. Turns out it’s $2K, and we decided to go ahead and pay it.

      To each his own. People shouldn’t judge you for this.

      I would only suggest that you put in place wills, power of attorney, etc and give your families copies of them.

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