If you have a significant other who believes that getting married is more of a financial liability than a benefit, that mindset is more common than you would think. Many people, largely confused by the long-held belief that married couples pay more in taxes than those who are single (the marriage penalty), have held to that line of thinking as a reason to avoid tying the knot.
Not only is it widely untrue for many couples, but there are other reasons why marriage makes financial sense.
Marriage Penalty/Marriage Bonus
America's progressive tax system cuts both ways for couples. Despite various attempts at reform, a marriage penalty still exists for some couples who earn about the same and are pushed into a higher tax bracket when the family income more or less doubles at marriage. By contrast, couples in which one partner earns all the income – or significantly more than the other – sometimes benefit from a marriage bonus because the higher earner's bracket drops after marriage and they end up paying less in taxes than if they'd filed separately as singles. Click here to calculate whether marriage would (or does) bring a penalty or bonus for you and your significant other.
Congress significantly reduced marriage penalties beginning in 2001 by doubling the standard deduction for couples compared that of single filers and making other changes. Legislation in 2001, 2009. 2012 and 2015 raised and made permanent changes in phaseout rules for the Earned Income Tax Credit for married couples also designed to help. But higher income couples still do worse on child tax credits and alternative minimum tax thresholds and parameters. Stay tune about what will happen under the tax changes expected from the Republican-controlled Congress and the Trump administration.
Possibly the largest financial benefit of getting married is health insurance. If one person has access to company-sponsored health insurance, he or she can add his or her spouse to the policy for an additional cost. If he or she isn't married, his or her spouse would generally have to acquire health insurance from a different source.
By pooling insurance needs, insurance costs go down. Multi-policy discounts and the lower price that comes with being married are just a few of the insurance benefits. According to Insure.com, a 23-year-old living in Indianapolis, Ind., could see as much as a 26% drop in his or her annual premium when applying for coverage as a married couple. Other discounts include multi-car policies and bundling homeowners insurance with auto insurance.
Two incomes are better than one. If you apply for a $150,000 house as a single adult, you may only have your own income for the bank to consider. As a married couple, your combined income will likely allow you to qualify for a larger loan with better terms assuming that your credit scores are reasonable.
If your credit score has taken some hits as of late, marrying somebody with a better score gives your credit score an instant boost. Of course the opposite happens, too. Your spouse's credit score may be negatively impacted by your lower score; in fact, individuals with poor credit often have trouble finding someone willing to marry them. All the same, as a couple you may be in a better financial position to get on a path to financial recovery.
Most people don't get married for financial protection, but marriage provides that advantage for both spouses. For starters, if one of you goes through a bad patch professionally or medically, there's someone else to help and, probably, bring in some income.
And divorce is hardly a reason to marry, but being married does provide protection if you split. It takes a court or a legal agreement to divide the assets of a married couple. Each party has some protection and a chance at equitable distribution of the marital assets. When two people live together, the legal procedure to divide assets isn't as clear. Courts have ruled in most states that divorce law doesn't apply to unmarried couples.
This means that contract law will apply in dividing up the assets. A non-spouse has no inherent right to any of the other person's assets, even if the property was purchased using combined funds. The exception to this rule is the handful of states that allow common law marriage, but it's a myth that living together for a certain period of time gives even these partners all the rights of a traditional marriage. Millennials Guide: Before You Move in with Your Partner goes over some of those rules.
The Bottom Line
If your partner is using finances as a reason not to marry you, this argument doesn't fare well against the facts. Getting married and staying married for the long-term brings with the opportunity for more financial security, providing each of you practice good family financial rules. Don't spend more than you have and limit or eliminate the use of credit cards. Managing Money as a Couple will help you work through these issues.