Long Term Financial Benefits of Gay Marriage
The financial cost/benefit analysis of gay marriage needs to not just include the current year tax return, but also the long term financial planning benefits of gay marriage.
Many people around the time of Valentine’s Day consider getting married. From a financial perspective, many people are very familiar with the potential “marriage penalty” that can lead to paying more income taxes for many high earning couples. So from a financial perspective, why get married? In fact, there are many long-term benefits to getting married that you may not be familiar with.
Benefits of an IRA While Married
An IRA, or individual retirement account, allows you to safe pre-tax income without paying any taxes while you are investing. This is a primary mechanism for millions of American’s to save for retirement, and it has even greater benefits for married couples. For example, if one works and the other does not, the non-working person can use their spouses income to qualify for IRA contributions. This is known as a “spousal IRA”. There are also advantages to inheriting an IRA while married. If you inherit an IRA from someone who is not your spouse, you must start taking minimum withdrawals from the account owner one year after their death. However, if you are married and you inherit and IRA, you may wait to start taking contributions until the age of 70 ½, as well as draw down smaller amounts each year.
Marriage Social Security Benefits
There can also be financial gains when it comes to claiming Social Security benefits. If there are large difference in the income within the couple, the lower earning spouse can claim benefits based on the other spouse’s earnings, which can be worth a large sum of money if the higher earning spouse works to full retirement age. Furthermore, if the higher earning spouse passes away first, his or her benefit will be able to go to the lower-earning spouse as what is called a “survivor benefit”.
Mortgage and Capital Gains
Having two incomes to put on a mortgage application, and having a legal obligation to one another, can be appealing to mortgage brokers. You can also avoid more tax obligations when selling profit for a gain. More specifically, individuals can only write off 250,000 in profit from selling their home, while married couples can write off half a million dollars. This can be a huge benefit for couples living in cities with very expensive and appreciating homes, such as Brooklyn or Manhattan.
A final benefit you should be aware of when getting married is the unlimited spousal inheritance law. If one’s spouse dies, their estate passes to the surviving one without having to pay any taxes. For domestic partners, the federal exemption is over 5 million, but in certain states the estate tax exemption is much lower.
In short, there are many benefits to getting married that might outweigh the effects of the “marriage penalty”. This should be considered when making such an important decision.