The oral arguments this week in Obergefell v. Hodges caused me to reflect on the importance of marriage equality. As the lawyers for the plaintiffs argued, the right to marry the person you love is about dignity, recognition, and respect. But it’s also about money.
You’ve likely heard that there are 1,138 federal benefits, rights, protections provided to married couples. These benefits span all areas of personal finance and can lead to significant extra costs for those same-sex couples that cannot get married. The New York Times calculated “a couple’s lifetime cost of being gay” as an additional $41,196. And that’s best-case scenario. Worst case you’re looking at $467,562!
The Supreme Court legalizing gay marriage would eliminate the majority of these additional costs. Today, I want to highlight some of savings that could result from full marriage equality.
1. Health Insurance: This was a big one for me and Ben. In addition to the extra time and hassle that it took to become Ben’s domestic partner, it cost us 25% more than similar situated married couples because my benefits were taxable. Being able to go down to his human resources department and show them our marriage license put another $500 in our pocket.
2. Income Tax: You hear a lot about the marriage penalty, but just as many married couples also receive a bonus when filing a joint tax return. In other words, the couple ends up paying less in total tax when filing jointly than they would as two individuals. When couples have disparate incomes a bonus results because the additional smaller income shifts the higher earner into a lower marginal tax bracket. For example, in 2014, a woman with $110,000 in taxable income (in the 28% marginal bracket) and her spouse that earned $30,000 in taxable income, pay $23,976 and $4,050 respectively in tax. That’s a total tax of $28,026. But, if they are able to file a joint return, they only pay $26,712 in tax on the $140,000 of taxable income (the 25% marginal bracket). Same incomes but $1,314 less in total tax.
3. Social Security Benefits: If you happen to be in a situation where one spouse works and the other does not, the government still allows the non-working spouse to share in social security benefits, despite not putting money into the system. He or she can take up to 50% of the retired worker’s full benefit. In addition, the worker’s benefits are not reduced by the amount the spouse gets. So as a couple you could receive hundreds of thousands in benefits over the course of retirement that a non-married couple would not get.
4. Estate Tax: United States v. Windsor, arguably the most significant marriage equality case to this point, was predicated on this benefit. Edith Windsor’s spouse, Thea Spyer, left her entire estate to Edith. When most married couples do this, the surviving spouse can claim the unlimited spousal deduction and avoid paying estate tax on all transfers. However, because their marriage wasn’t recognized by the federal government, Edith was required to pay $363,053 in estate tax. Edith’s cost went from $360k to zero just be having her marriage recognized from the government.
5. Investing: Married couples gain a huge advantage by being able to invest in a retirement account for both spouses, even if one spouse does not work. Normally, you can only invest in an Individual Retirement Arrangement (IRA) if you have earned income. However, non-working spouses can contribute to a spousal IRA as long as the other spouse had taxable compensation. Maxing out the account and earning a 7% return over 30 years would result in a nest egg worth over $1.2 million.
These are just some of the moneymaking situations that result from being able to get married. And while I understand marriage is about way more than money, the financial benefits are hard to ignore.