By Aaron Crowe
Aaron Crowe is a freelance journalist who specializes in personal finance. Aaron blogs via Contently.com.
With all of the expenses of getting married, and the marriage penalty tax looming for newlyweds, you’d think marriage is a bad financial choice.
Marrying for money is a bad idea, but getting married doesn’t have to mean paying higher taxes and seeing your savings fall to nothing. Saying “I do” can be the start of saving money as a couple. Here are some ways marriage pays off:
Marriage penalty myth. Congress changed the tax rules in 2001 to deal with the marriage tax, although working couples who have similar incomes will likely pay more than they would if they remained single. But for many people, the marriage penalty is a myth that they can bust at tax time.
According to an MSN Money story, 51% of married couples paid less tax jointly than if they had not been married, saving them $1,300. However, 42% of married taxpayers paid more filing jointly with an average penalty of $1,380.
If you’re looking to save money on taxes as a couple, then typically the bigger the gap between the paychecks of the husband and wife, the bigger tax break they get.
Splitting the bills. Similar to having a roommate, having a spouse provides someone to help you pay the bills. You’ll be sharing everything and cutting expenses from two separate households. Instead of two cable TV bills, you’ll have one. The same goes for the telephone, rent, food, Internet, electricity, water, heat and many other costs.
Better credit. If one of you has better credit than the other, help the other achieve an improved credit score by paying off debts. It may take a while to retire debts and have that reflected on a credit score, but it will be like finding money in the bank once the debts are paid off.
Two incomes. If both people are working, two incomes will help in many ways, but especially when buying a home. Since you’re saving on expenses, the two incomes can be used to save for a bigger down payment, and your combined better credit scores will help get a better home loan rate.
Car insurance. Single guys usually get charged more than single women for car insurance, but rates for men often drop once they get married. Having two cars on the same policy helps, too.
Workplace benefits. Health coverage through an employer is typically taxable income, but it’s tax-free when a spouse is covered. The same goes for pension benefits.
Social Security. A husband or wife is entitled to half of the spouse’s Social Security benefits and to additional benefits after the spouse dies. Women, however, may get the short end of the Social Security stick when their husbands die. The Social Security Administration says that 62% of women over age 62 who receive benefits do so based on their husband’s work records, not their own. In some cases, the women didn’t earn enough to qualify for payments or their husbands’ benefits were larger, according to the MSN story.
But in a sense it’s a penalty because the women aren’t getting the Social Security benefit they earned in their working years. They’re getting their husband’s money — the same amount they would have received if they had never worked and paid into Social Security.
It’s more money than they would have received without being married, which in the end is a benefit to being married.