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If my partner and I get married, we know that out Federal income tax will go up by several thousand dollars a year (the marriage tax). We have done the calculations.

Are there any financial advantages to being married that could offset or reduce this penalty? We are past retirement age, with no children and no mortgage and unlikely to need to borrow. I'm not asking for a quantitative answer, just some possibilities that we could investigate.

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    The marriage penalty has mostly gone away, as the tax tables show that the married numbers are twice the single. Can you give a hint what's causing your issue? – JTP - Apologise to Monica Feb 22 '17 at 22:54
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    @JoeTaxpayer I think you're looking at MFJ vs. MFS. The numbers for MFJ vs. single vary from 2x to as low as 1x (top of 33%). – Kevin Feb 22 '17 at 23:09
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    @JoeTaxpayer My partner and I are currently in the 25% bracket. MFJ would push us into the 28% bracket. – mkennedy Feb 23 '17 at 1:05
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Are there any financial advantages to being married that could offset or reduce this penalty?

  • In many states and federally, spouses can inherit the other spouse's assets without the estate being charged estate tax.

  • You can give twice as much money to an individual without triggering gift tax. Often used during periods of failing health to avoid estate tax later. Works especially well if you have a large number of heirs between the two of you.

  • If one of you is in the hospital, the other can make family financial decisions while the first is incapacitated.

6

There is definitely a marriage penalty for some people. For example, if you and your partner each have an income of $80k, you are each in the 25% tax bracket. However, once you are married, your combined household income of $160k puts you in the 28% tax bracket.

However, the married brackets favor those couples who have one spouse with a higher income and one with a low or no income. For example, if you have a $80k income and your partner stays home to take care of kids, you are well into the 25% bracket as a single, but if you are married your $80k income is just barely into the 25% bracket, with most of your salary taxed at a lower rate.

Since you are both retirees, your incomes are more or less fixed in your situation. The tax benefits to marriage in your situation are related to the estate tax and the gift tax, as detailed well in Brythan's answer.

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