Comments on: Financial/Tax/Credit implications of Marriage? Actions to take beforehand?

Question: Financial/Tax/Credit implications of Marriage? Actions to take beforehand?

lalochezia — Mon, 08 Dec 2008 08:15:54 -0800

We're probably having a quick before-end-of-financial-year Wedding in California. What are some marriage tax / credit / legal / other benefits? Disadvantages? Actions to take before marriage to maximize our stability and security?

My sweetie and I had planned on getting hitched in Mid-09 with a proper ceremony and quite a few guests. However, due to financial pressures, it's not likely we'll be ready to have a big wedding any time soon. It probably benefits us to get married quickly with a civil service, due to tax savings for joint filing and the ability for her to share my employment benefits. We'll likely get hitched in CA before the year's out. This is a heteronormative marriage BTW.

I'm keen on knowing the other legal & financial implications of a) getting married and b) getting married quickly. What are other benefits/costs? Are there any actions (financial, legal) that sensible people who have time before their marriage perform that we might have missed out on?

We're going to an accountant to have our tax situation analyzed. Things I've found from the internet: CA Tax. Under the California state tax system, there is no marriage penalty in the tax bracket structure, so getting married usually won't hurt and can help. Federal Tax: Your status on the last day of the year determines your filing status for the entire year. If you're married, you and your spouse can choose to file a joint return or file separate returns. Unless you are required to file separately, you should figure your tax both ways (on a joint return and on separate returns) to determine which filing status is best for you....

I saw this q as well.

By: sageleaf

sageleaf — Mon, 08 Dec 2008 10:17:34 -0800

California is a community property state. Whether or not this is advantageous for you will depend on your situation and what happens in the future, but it is something you should be aware of.

By: Wolfie

Wolfie — Mon, 08 Dec 2008 10:25:22 -0800

If you're going to an accountant before you get married - they'll give you the best advice. I know that we had a late in the year wedding and hadn't changed our deductions that year to account for us being married and we got hosed. Years to recover from that tax bill hosed. Combining our incomes put us in a much higher tax bracket than we had been separately and no amount of filing jointly/separately shenanigans can get you out of that.

By: iminurmefi

iminurmefi — Mon, 08 Dec 2008 10:29:45 -0800

Just an FYI--depending on your income and your fiance's income, you might be worse off in terms of federal taxes, even if your state doesn't have a marriage penalty--and since federal taxes usually make up a much huger part of your total tax bill, that could be an unpleasant surprise. (Or you may be better off--it really depends on how much each of you make both absolutely and comparatively.)

The "marriage penalty" on the federal level refers to the fact that once married people get to the 25% tax bracket, the cut-offs that push you into the next higher tax bracket are *not* double the limit for a single. So, as you can see on the tax rate schedule here, in 2008 a single person can make up to $78,850 and still be in the 25% bracket. However, married couples can only have household income up to $131,450 before flipping into the 28% bracket.

If you *and* your fiance were both somewhere between $65K and $78K, you'd face higher taxes in 2008 by marrying than you would be staying single.

There's of course lots and lots of benefits to marrying, and tax codes can always change, so I'm not saying it'd be a reason to never get married, but you should definitely double-check the actual numbers before pushing your wedding up to this year. I see you're heading to an accountant, and he should be able to do that for you; alternatively (or for other people who may run across this question), you could just head over to TurboTax or another one of those free-until-you-file tax software sites and plug in your numbers to actually check.

I've had a few friends that faced a nasty tax surprise in April because they both work, make comparable salaries, and didn't realize they'd get nailed on taxes. Given that you're in California, which has a higher-than-average cost-of-living, I think it's not totally unlikely that you'd fall into a bracket that fared worse if married than if single.

By: crinklebat

crinklebat — Mon, 08 Dec 2008 20:08:03 -0800

Ugh, I got married in August and lazily failed to change my tax forms until mid-November, and I am getting taxed to the tune of 50% for the remainder of the year in order to make it up (just what I needed around the holidays). It stinks. Every couple's situation is different and you should talk to a qualified financial advisor to be sure, but if there's any chance that you'll get bumped up to a higher bracket by your marriage, you may want to wait until the new year. Once we roll over into 2009 I end up with something like $15 of additional withholding per pay period, totally manageable...it's just the end of this year that's bad as I try to make up back taxes I should have been paying since August.