When it comes to the subject of marriage and money, one persistent myth is that tying the knot inherently leads to a “marriage tax penalty.” However, this notion overlooks the numerous financial benefits that marriage can provide, especially for couples who approach it as an economic partnership. Far from being a liability, marriage can offer a range of advantages, from tax savings to increased access to credit and insurance discounts.
Key Takeaways:
- Married couples can save money by combining incomes and sharing household expenses like rent, utilities, and groceries.
- Tax benefits such as filing jointly, doubled standard deductions, and higher IRA contribution limits can lead to substantial savings.
- Access to better credit, larger loans, and bundled insurance policies at lower rates are advantages of being married.
- Social Security spousal benefits and the ability to combine retirement savings can significantly boost a couple’s nest egg.
Top 5 Reasons Why Marriage makes financial sense
Marriage can make financial sense for several reasons:
1. Combining Incomes and Household Expenses
One of the most obvious financial benefits of marriage is the ability to combine incomes and share household expenses. By pooling resources, married couples can save money on rent or mortgage payments, utilities, groceries, and other living costs. According to a study by the U.S. Bureau of Labor Statistics, married couples spend an average of 25% less on housing costs than their single counterparts.
Additionally, marriage allows couples to pool their resources for major purchases, such as buying a home or a car, which can be challenging for singles or unmarried partners. Federal Reserve data from 1989 to 2016 revealed that the typical married household had three times as much wealth as a typical single person or unmarried couple.
2. Tax Benefits of Marriage
Contrary to the myth of the “marriage tax penalty,” there are several tax advantages that married couples can enjoy. One of the most significant benefits is the ability to file jointly, which can result in a lower overall tax bracket compared to filing as two single individuals.
For example, in 2024, the standard deduction for married couples filing jointly is $29,200, which is exactly double the $14,600 deduction for single filers. This means that married couples can effectively double their standard deduction, resulting in significant tax savings.
Additionally, married couples have higher income thresholds before entering higher tax brackets. For instance, if one spouse earns significantly less than the other, their combined income may fall into a lower tax bracket than the higher-earning spouse would be in as a single filer.
| Tax Bracket (2024 Single Filers) | Taxable Income | Tax Bracket (2024 Married Filing Jointly) | Taxable Income |
| 12% | $11,000 – $44,725 | 12% | $22,000 – $89,450 |
| 22% | $44,726 – $95,375 | 22% | $89,451 – $190,750 |
| 24% | $95,376 – $182,100 | 24% | $190,751 – $364,200 |
Source: IRS.gov
Moreover, married couples can take advantage of higher IRA contribution limits based on their joint income. They can also benefit from the Earned Income Tax Credit (EITC) if one spouse has a relatively low income.
3. Better Access to Credit and Loans
Being married can significantly improve a couple’s access to credit and larger loans. Lenders typically consider the combined incomes of married couples when evaluating loan applications, which can increase their borrowing power for major purchases like a home or a car.
Furthermore, if one spouse has a better credit score than the other, the couple can leverage the higher score when applying for loans or credit cards. This can result in more favorable interest rates and terms, potentially saving thousands of dollars over the life of the loan.
Conversely, marriage can also provide an opportunity for spouses to help each other improve their credit scores. By practicing good financial habits together, such as making timely payments and keeping credit card balances low, couples can build a stronger credit history as a unit.
4. Insurance Advantages of Being Married
Married couples can often benefit from substantial discounts on various types of insurance, including auto, home, and life insurance. Most insurance providers offer multi-policy discounts for bundling different types of coverage, which can result in significant savings.
Additionally, being married can provide access to employer-sponsored health insurance plans through either spouse’s workplace. This flexibility allows couples to choose the best coverage option for their needs, potentially saving money on out-of-pocket medical expenses.
Another advantage is the availability of long-term care insurance discounts for married couples. Insurers recognize that spouses are more likely to care for each other at home, reducing the insurer’s liability and resulting in lower premiums.
5. Social Security and Retirement Benefits
Marriage can also have a positive impact on a couple’s retirement planning and Social Security benefits. One spouse may be eligible to receive spousal benefits equal to 50% of the other spouse’s Social Security benefits if their own benefit is less than that amount.
Furthermore, married couples can contribute to Individual Retirement Accounts (IRAs) based on their combined income, effectively doubling the amount they can save for retirement compared to two single individuals. This increased contribution potential, combined with the tax-free growth and withdrawal advantages of Roth IRAs, can significantly boost a couple’s nest egg over time.
Combining their retirement savings and investment accounts, married couples can also benefit from greater diversification and potential for long-term growth, setting themselves up for a more secure financial future.
Conclusion
While the myth of the “marriage tax penalty” persists, the reality is that marriage can offer numerous financial advantages when approached as an economic partnership. From shared household expenses and tax benefits to improved access to credit, insurance discounts, and retirement savings opportunities, the financial perks of marriage are substantial.
However, it’s crucial for couples to have open and honest communication about their financial goals, spending habits, and money management strategies. By working together as a team and leveraging the advantages of marriage, couples can build a strong foundation for long-term financial stability and security.
Marriage is not just an emotional commitment but also an economic partnership. By understanding and capitalizing on the financial benefits, couples can unlock a path to greater prosperity and a more secure future together.
