While there are obvious benefits to devoting oneself to a lifelong companion, like love, support, and all that other romantic stuff, there are also real financial benefits to getting married (as well as costs). Read on for a discussion of how marriage can positively, or negatively, affect your finances.
Tax Benefits
The first benefit of getting married is generally the tax benefits you’ll receive when filing jointly. This depends on your and your spouse’s income, but for most people it’s best to file jointly. For couples with high income inequality, filing jointly will usually place you in a lower tax bracket with a lower tax burden. However, if you and your spouse both have high incomes, you could incur a tax penalty and should probably file separately.
Couples who file jointly often qualify for several tax credits, such as the Earned Income Tax Credit, the American Opportunity Tax Credit, Lifetime Learning Education Tax Credit, and the Child and Dependent Care Tax Credit. If you and your spouse decide to file separately, however, then your standard deduction will be much lower than if you filed jointly and you will be automatically disqualified from multiple tax deduction and credits.
Social Security Benefits
If you’re married, you’ll be able to take advantage of Social Security benefits. Married couples are able to collect their own individual Social Security benefit or up to 50 percent of their spouse’s, whichever is greater. This is a boon to individuals whose spouse is a high earner or if they haven’t paid enough into Social Security. Also, if you are a widow or a widower, you may be able to collect up to 100 percent of the deceased’s benefit.
Student Loan Debt
While you and your spouse will each be responsible for their own student loans, your student loan payment may increase depending on your payment plan. For example, the Revised Pay As You Earn repayment plan calculates your payments based on your combined household income, even if you file your taxes separately. The Pay As You Earn plan will let you pay off your loans based solely on your own income, but your payments will most likely be higher and you must file your taxes separately.
If you file jointly, and depending on how much your spouse makes, you may not be able to qualify for the student loan interest deduction, which is up to $2,500 of your taxable income. If your combined income is over $160,000 a year, you won’t be able to qualify.
Credit Scores
If you have joint finances with your spouse, then their spending habits and repayment history can affect your credit score. This is a double-edged sword because it’s also possible that your significant other has a very responsible credit history. The fact is, the home and auto loan rates you qualify for will be affected, so it’s an important factor to consider before combining your finances.
For more on finances, follow NEXT Financial Group, Inc. on Facebook and LinkedIn and subscribe to this blog on the right-hand side of the page.
https://www.consumerreports.org/marriage/financial-benefits-of-marriage/
https://www.schwab.com/resource-center/insights/content/does-marriage-bring-financial-benefits
https://qz.com/1262993/does-it-make-financial-sense-to-get-married/
Neither NEXT Financial Group, Inc. nor its Representatives give tax or legal advice.
