5 Ways Getting Married Can Lower Your Tax Bill
Ah, marriage. In an ideal world, once you say “I do,” you’re living in the “happily ever after” chapter of your love story. Marriage comes with plenty of benefits, like passion, companionship and security — and possibly lower taxes. That’s right: Tying the knot can unlock meaningful perks come tax time.
Curious about the ways getting married could potentially lower your tax bill, MoneyLion did a little research. The benefits are tempting enough to make us wonder whether it’s time to hop back on the dating apps.
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1. You Can Select “Married Filing Jointly”
Anyone who’s even casually skimmed a tax form knows you have different filing options based on marital status. If you and your spouse choose “married filing jointly,” you may get some perks:
Potentially lower tax brackets for your combined income
A larger standard deduction
Access to certain tax credits that phase out at lower income levels for single filers
In plain terms, if one partner earns significantly more than the other, their combined income could be taxed more favorably than if the higher earner filed as single.
No wonder that perk is often called a “marriage bonus.” That said, depending on income levels, some couples may experience a “marriage penalty,” so it is worth running the numbers both ways.
2. You Get Estate and Gift Tax Advantages
Of course, the love between you and your spouse is the greatest benefit of marriage. But let’s be real: The estate and gift tax advantages are pretty sweet, too.
H&R Block explains it succinctly: “Spouses can give unlimited gifts of cash or other property to one another free of gift taxes. This has important implications for estate planning purposes, so be sure to revisit your estate plan once you get married.”
This is known as the unlimited marital deduction, and it allows spouses to transfer assets to one another during life or at death without triggering federal gift or estate taxes.
Given these powerful perks, your next stop after dropping off all your thank-you cards at the post office might be your estate attorney’s office.
3. You Get Easier IRA Beneficiary Options
Normally, the rules for inheriting an IRA can be frustratingly complicated. In some cases, when you’re named as a beneficiary, you end up paying taxes sooner than you’d like. Fortunately, marriage can ease some of that hassle.
H&R Block explains: “Spouses have a special rule which may ultimately mean you can defer the distributions longer and if you are in a lower income tax bracket at the time of distribution, paying less tax on the distribution. When you name your spouse as the beneficiary of your IRA, your spouse can treat the inherited IRA as their own.”
The firm adds that, with traditional IRAs, your spouse may be able to delay taking distributions longer than another beneficiary could. In many cases, a surviving spouse can roll the inherited IRA into their own IRA and delay required minimum distributions until they reach the applicable RMD age. For Roth IRAs, the news is even better: Your spouse wouldn’t have to take required minimum distributions during their lifetime if the account is treated as their own.
4. You Can Go “Benefit Shopping”
Through your job, you likely have access to tax-advantaged accounts like 401(k) plans, health savings accounts, or HSAs, and flexible spending accounts, or FSAs. In addition to their long-term value, these accounts can offer tax savings through pretax contributions, tax-deferred growth or tax-free withdrawals, depending on the account.
When you’re single, you’re generally limited to the benefits offered by your employer — though some tax-advantaged accounts are available outside the workplace. If both you and your spouse receive benefit packages through your jobs, however, things get interesting. You have options.
Writing for TurboTax, attorney Rocky Mengle describes the freedom to go “benefits shopping.”
“If both you and your spouse have benefit packages from your jobs, you can usually pick the most valuable benefits offered by both employers,” he said. “By choosing the right mixture of benefits from both employers, married couples can often increase their tax savings.”
5. You Enjoy Easier, Less Expensive Filing
It’s common sense: Filing one tax return typically takes less time and money than filing two. And if you and your spouse rely on an accountant or CPA, you may also reduce the cost of preparing your returns.
In addition, certain tax software programs charge per return, so combining your filing could lower out-of-pocket costs.
You can put that extra money in a sinking fund for a first-anniversary cruise.
The Bottom Line
Entering into matrimony can also mean entering into a lower tax bill. While marriage doesn't guarantee tax savings, it can open the door to valuable strategies and deductions that aren't available to single filers. And if lower taxes don’t sound romantic enough, just imagine how the money you save could help you grow old together — happier and healthier.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal, or tax advice.
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