A Valentine's Day proposal could lead to a money boon for you in many ways
Valentine’s Day isn’t just about exchanging chocolate and flowers with a loved one. It’s also a day when many people consider getting engaged. According to a study by American Express, 1 in 12 unmarried couples was expecting a proposal on Valentine’s Day last year.
Proposing to your loved one can lead to many financial bonuses—assuming the proposal leads to marriage. Here are a few of the financial benefits of getting married.
Lower car insurance premiums. When you unite with someone, chances are your cars will unite as well, under one car insurance policy. The cost of insuring two cars this way is typically much less than having an individual policy for each car. Most insurance companies offer a multicar discount, and many also have a reduction in rates for married couples, which are actuarially less risky.
Our recent analysis found that two 30-somethings who combined their car insurance policies after marriage would save an average of $525 per year on the merged policy. The savings vary by state and insurer. A Texas couple in this example would save an average of $780 with Geico but just $360 with State Farm.
If you decide to get married, shop around for insurance. You may be able to find further savings by bundling your home and auto policies, increasing your deductible, or opting for a pay-as-you-drive policy.
There is one exception to this being a financial benefit of getting married: If one spouse has a particularly poor driving record, his history could push up the rate for both parties under one policy. “If you’ve had a lot of speeding tickets or a number of accidents, you could drag your partner down,” says Loretta Worters, a spokeswoman for the Insurance Information Institute.
More tax benefits. There are several ways that the tax code favors married couples filing jointly over single filers in most cases. If there’s a large discrepancy between the bride and groom’s incomes, for example, the lower-earning spouse might serve as a tax shelter for the higher earner.
Example: A bride with no deductions and a taxable income of $65,000 would owe $9,434 in 2016 taxes, while her groom making $40,000 would owe $3,984. Filing as a joint couple with a taxable income of $105,000, however, they’d owe $12,368, a savings of $800.
High-earning couples with similar incomes might actually face a “tax penalty” for filing jointly, so run your numbers with this calculator from the Tax Policy Center.)
Married couples might find additional tax savings if their combined deductions now give them the ability to itemize their taxes. They’ll also save by paying just one preparer to do their returns rather than two.
More Social Security options. Of the hundreds of federal financial benefits of getting married, options around claiming Social Security might be one of the most valuable. Most married couples have the option to claim their own Social Security benefits or to claim spousal benefits under their spouse’s earnings. That can be a great deal if one member of a couple didn’t pay into Social Security for at least 40 quarters (10 years) or earned significantly less than the other.
Under the spousal benefit, you may be able to receive Social Security payments worth up to 50 percent of your spouse’s entitlement at full retirement age. Your claim will have no impact on how much your spouse receives.
As is the case with individual Social Security benefits, you can file for spousal benefits when you turn 62 (as long as your spouse has already filed for Social Security or disability benefits), but for every year you wait the amount of your check will permanently increase until you reach your full retirement age.
Exemption from the gift tax. Even if an unmarried couple isn’t exchanging large gifts, sharing large expenses might trigger gift tax issues. If there's a large discrepancy between the incomes of a couple and one member is paying for more than 50 percent of joint household expenses and more than the $14,000 gift tax threshold, she might have to file a gift tax return for the additional amount, says Jacquelyn Boyer-Nesbitt, vice president and senior wealth strategist with PNC Wealth Management.
It’s possible to address the issue with some advance tax planning, but getting married would eliminate it entirely. “The IRS does not look at who in the marriage is paying the expenses,” Boyer-Nesbitt says. “Nor does it look at how assets are titled despite who may have paid for the asset.”
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