The financials of same-sex marriage
The Supreme Court ruling that same-sex couples have a right to marry could bring some big financial changes.
First, let’s talk taxes and the marriage penalty.
“Where there’s a plus, there’s a minus,” says Janis Cowhey, a partner at Marcum LLP and co-leader of its Modern Family and LGBT practice group. “Once you’re combining your income, you start to lose deductions, you start to lose credits as well as hit the higher income tax brackets faster.”
But lower-income same-sex couples could save money filing as a married couple. Now they can claim their children as dependents, which leads to a higher earned income tax credit.
And if your spouse gets benefits through your job, that’s not taxed.
Right now, “if you work for a corporation and they offer domestic partner benefits, you’re taxed on the benefit that your partner gets,” says Bill Moran, a senior vice president at Merrill Lynch and national director of its LGBT financial services team.
But here’s the thing. Moran says corporations have already started phasing out domestic partner benefits in states that recognized same-sex marriage.
It happened to Meghan Maury, an attorney in Washington, D.C. She now works as senior policy counsel at the National LGBTQ Task Force as the director of its criminal and economic justice project.
But before she got that job, she depended on her partner’s employer for benefits — until same-sex marriage was legalized in the District of Columbia.
“They said it just doesn’t make legal or financial sense for us anymore to be providing domestic partnership benefits,” she says.
Maury ended up on Medicaid. And she thinks that’ll happen to other unmarried same-sex partners, as more employers phase out domestic partner benefits in the wake of the Supreme Court ruling.
Despite Friday’s 5-4 ruling by the Supreme Court that same-sex marriage is legal in the United States, some same-sex couples won’t immediately receive marriage licenses.
In Mississippi, State Attorney General Jim Hood announced that same-sex marriage license depends on “when the 5th Circuit lifts the stay of Judge (Carlton) Reeves’ order,” Hood said in a statement. “This could come quickly or may take several days. The 5th Circuit might also choose not to lift the stay and instead issue an order, which could take considerably longer before it becomes effective.” And in Pike County, Alabama, Vox reported that by not issuing any marriage licenses, technically, the county wasn’t discriminating between couples.
Eventually, the roughly three million gay Americans in 13 states that previously banned same-sex marriage will be able to formally marry – and that could be a big economic boost. As the Washington Post notes:
“About three-quarters of Americans get married at some point in their lives, meaning that perhaps 2.2 million of those newly-empowered gay Americans will at some point wed. That means 1.1 million marriages. The average cost of a wedding is $26,444, according to the aptly named CostOfWedding.com. Meaning that Friday’s decision could be a $29 billion economic stimulus. (Feel free to use that number with the caveat that it’s basically made up.)”
Getting married usually lowers a couple’s tax burden, Bloomberg notes that there is one instance when marriage can result in being taxed at the highest marginal rate:
If a lawyer and a stay-at-home dad marry, for example, they’ll almost certainly save money on taxes. Couples can face a higher tax bill, however, if both spouses earn about the same. The marriage penalty can be especially high—in some cases, tens of thousands of dollars a year—if both are well-paid professionals with six-figure salaries. If you and your partner each make $300,000 a year, you’re paying a top tax rate of 33 percent. If you get married, your $600,000 will be taxed at 39.6 percent.
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