Marriage has many benefits for a family – whether the couple is the same or opposite gender. In addition to the dignity and stability that can come with binding a couple in matrimony, there are a number of very real legal, tax, and financial benefits as well (and some burdens). Collectively, these are housed in both Federal laws and regulations, and on the state level.
For example, married couples often enjoy favorable tax consideration by having the ability to file joint tax returns and combine gift and estate tax exclusion limits, as well as tax free gifting between spouses. While combining incomes usually forces a couple to reach a higher effective marginal rate quicker and therefore be subject to more income tax – commonly referred to as the ‘marriage penalty’ – the unlimited marital deduction will always apply to estate taxes. Each couple needs to evaluate their own personal situation properly with a qualified advisor to determine which is better for them, based on income, assets and overall goals.
There are a variety of variables that may apply to legal, tax, and financial benefits. There are a variety of variables that may apply to legal, tax, and financial benefits. For instance, one spouse may own a home that was purchased many years ago. When selling that home there may be capital gains taxes. By combining ‘exemptions’ on the sale of a personal residence, couples may pay less (or no) capital gains tax. How property is titled before it is sold matters.
A similar analysis should be done with stock and other asset accounts. In addition to maybe reducing capital gains tax, a couple may be able to share capital losses on a combined return and get more deduction.
Though the ‘marriage penalty’ is more common, it is also possible to have a ‘marriage bonus’ if couples have vastly different income levels. All couples should run their own numbers and see whether they are better or worse off from a tax perspective as a result of marriage. They may even be able to amend prior year’s returns to get a refund. Ask your advisor for help!