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If each member of a couple makes a high income, they pay much more U.S. income tax if married.

So it makes sense for them to avoid legal marriage.

They can still do a religious ceremony or a commitment ceremony without notifying City Hall. They can exchange rings. If they want to tie their financial lives together, a lawyer can help them buy a house jointly, open a bank account together, give each other Powers of Attorney, etc.

So why do so many high-dual-income couples go through the bureaucratic side of marriage?

Joshua Fox
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    This question seems like an awkward fit for Money.SE. Money-related factors are probably not often primary in the decision to get (legally) married. Even if you totally ignore the emotional factors, there are a range of legal implications well beyond our always-shifting tax code, per @defaultlocale's comment. Answering this from a strict personal-finance perspective would feel narrow and inaccurate, and answering it in the broader context would feel (way) off topic. – dwizum Mar 04 '20 at 14:05
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    Married couples can choose to file as "married filing separately" should they choose to, so I disagree with the premise of this question. In some cases, filing together actually results in less tax. – Digital Chris Mar 04 '20 at 18:41
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    @DigitalChris, married filing separately tends to make the worst case assumptions about the spouse. It doesn't tax each spouse the same as if they were unmarried. The cases where filing as married results in less tax (than two single people filing as single) are when one spouse makes significantly less than the other. That's why OP specifically asked about "dual-high-income couples". – The Photon Mar 04 '20 at 19:11
  • I mentioned the possibility of religious or non religious commitment ceremonies to cover the personal feelings aspect, leaving open the financial question. – Joshua Fox Mar 04 '20 at 19:57
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    But I think my comment stands, even with your edit. There are many non-personal-feelings, non-financial reasons as well. Ultimately I don't feel that there are many couples that sit down and make a list of objective financial reasons before deciding to get married. Hence I don't really think this question is strictly answerable, unless you're willing to consider "because I wanted to" as an answer. – dwizum Mar 04 '20 at 20:07
  • @dwizum you are right. But I wonder how many couples do think this way – Joshua Fox Mar 04 '20 at 20:34
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    There's at least one largely practiced religion in the U.S. that includes being lawfully married as a requirement to their definition of marriage, so for millions of people, "they can still do a religious ceremony" doesn't apply anyways. – Davy M Mar 04 '20 at 21:16
  • you seem to assume that everyone is religious? – njzk2 Mar 04 '20 at 21:46
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    Could it be that most of them got married before they started earning high incomes, and think that the financial cost of even a "friendly" divorce is likely to be more than the tax savings? – jamesqf Mar 05 '20 at 04:16
  • @njz2 that is why I mentioned"commitment ceremony" alongside "religious ceremony". – Joshua Fox Mar 05 '20 at 06:39
  • @jamesqf ok, l let's ask the question specifically about those who are already high incone – Joshua Fox Mar 05 '20 at 06:40
  • @Davy M thank you, that's interesting. I hadn't known that some religions give religious significance to the City-Hall element of marriage. – Joshua Fox Mar 05 '20 at 06:42
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    In the UK the religious ceremony contains the "lawfully married" part. Is that not also the case in the US? – Caleth Mar 05 '20 at 07:33
  • @Caleth In most US states, the minister gets registered as the agent of the state, and so performs the civil marriage. Because of freedom of religion, pretty much anyone can be registered this way. I think that in California, civil and religious marriage are totally separate: You get the civil marriage at City Hall and do whatever you want with a clergy person if you so choose. – Joshua Fox Mar 05 '20 at 07:56
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    Your question makes it sound like a typical dual earner high-income couple is loosing money from being married. From the question you linked this is highly misleading. First the example given uses 400k household income, iirc that puts you in the top 1% of household, second they need a large mortgage and if I understand correctly they need to be in CA or NY and have no children. There are couple who loose tax money due to being married but it takes a quite sepcific combination of factors and in most other situations being married results in less tax. – quarague Mar 05 '20 at 07:57
  • I'm not disputing that you can be civilly married without a religious ceremony. I am disputing that you can have a religious ceremony and not be civilly married, at least in states where "anyone can be registered this way" – Caleth Mar 05 '20 at 08:04
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    @Caleth I am not an expert. But given freedom of religion, how could a state legally define that a given chant, handwave, or incense-burning described by a word in Latin, Hebrew, or Sanskrit "counts" a marriage? – Joshua Fox Mar 05 '20 at 09:51
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    The state doesn't do that. The religious group chooses to include the civil marriage in their ceremony. All the religious groups I know of choose to do that where possible – Caleth Mar 05 '20 at 09:58
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    @Caleth: There are religious groups that have plural marriages, or had gay marriages in the days before those were legal. – jamesqf Mar 05 '20 at 17:16
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    @Caleth I believe the requirement for marriage licenses addresses this. Simply performing the ceremony doesn't do it, even if the officiant is legally able to do so. Requirements for the license vary by state, but as far as I know every state requires one (a few exceptions exist, such as for common-law marriage, tribal marriage, etc.) – barbecue Mar 05 '20 at 19:09
  • @barbecue Go to a church (or synagogue or mosque or temple ...) and ask to have a wedding ceremony, and tell them you intend to not be legally married at any point in the future. I think the officient will decline to hold such a ceremony. – Caleth Mar 05 '20 at 19:14
  • look up "Community Property" in regards to taxation in several states where even 'married, file separately' sometimes doesn't make a big impact – NKCampbell Mar 05 '20 at 21:52
  • @Caleth: Those are only a few of the many religions out there. – jamesqf Mar 06 '20 at 18:22
  • @Caleth You said " I am disputing that you can have a religious ceremony and not be civilly married." A) I've personally attended such ceremonies, so I know it's not true. B) my point is that a wedding ceremony of religion X is neither necessary nor sufficient to create a legal marriage. The license must be obtained, and the officiant must not only perform the ceremony, but also report it to the clerk of the court. If you forge a fake marriage license, even if you have a ceremony in a cathedral with a bishop as your officiant, you're not legally married. – barbecue Mar 06 '20 at 19:09
  • @barbecue I meant in the context of the hypothetical high-earning couple who wish to be single for tax purposes, but could otherwise actually marry. – Caleth Mar 06 '20 at 19:20
  • “I like to pay taxes. With them, I buy civilization.” ― Oliver Wendell Holmes Jr. Not everyone bases their life around tax avoidance. – Andrew Lewis Mar 06 '20 at 19:41
  • Probably some dumb reason like loving each other. – Paul D. Waite Mar 07 '20 at 11:44
  • @PaulD.Waite People can love each other without marriage; and if they want to express love with marriage, most people want a meaningful ceremony -- religious or not. Does a bureaucratic office at City Hall really resonate more strongly with love for most people? – Joshua Fox Mar 07 '20 at 17:10
  • @JoshuaFox: nothing expresses love more strongly than paying a bit more tax. – Paul D. Waite Mar 07 '20 at 18:20

7 Answers7

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TL/DR:

  • Basing your life on current tax law is foolish. Tax laws will change.
  • Personal finance is largely about emotions and behavior: math plays less of a role than one might think.
  • Seeing a lawyer for common transactions might encourage one to marry just to avoid using a lawyer.

Your question also represents the misunderstanding that much of personal finance is about math; it is also about behaviors and emotions. We marry for a lot of reasons, and many of them have nothing to do with math. Tradition, religious beliefs, treatment by others all play into it. For example, some women want a Tiffany ring for their engagement. They could have larger diamonds for less money by buying an off-brand that only a select few can differentiate, but that is what they want. The whole thought and purchase of rings plays into your question but also provides a bit of an answer.

The thought of involving lawyers in my financial affairs would probably lead me to marriage anyway. Dealing with lawyers is expensive, time consuming, and they often make mistakes. Buying a home is stressful as is. Adding another layer onto that may lead a person to marriage despite any tax inefficiency.

Also, this site is full of questions regarding tales of woe where unmarried partners bought assets without involving lawyers. Every significant purchase including cars would require the intervention of a lawyer. No thank you.

The new tax laws may have also made your question not applicable. In 2020 only individuals who make more than $518,401 that also have a spouse that makes more than $103,650 experience some tax inefficiency. That inefficiency is experienced on each dollar earned above those numbers. So, if a wife earns $520k/year and her husband $110K, they would pay about $167 more in taxes per year than if they remained single. That is not to say tax laws will not change in the future, but that is a point to consider. Basing life decisions on current tax law is a bit foolish as it will change. It should be noted that very few households will fall into this income category.

Some high-income couples actually benefit mathematically from being married. For example, in some locations, obstetricians put all their assets in their spouses' names and do not carry malpractice insurance. The insurance is so expensive, and the frequency of successful lawsuits so common, that this is the best practice. When a dead or injured child is involved, the plaintiffs will be awarded some money regardless of liability.

yoozer8
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Pete B.
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    To add a few more financial reasons to be married - using your spouse's health insurance, not being required to designate a beneficiary for all of your assets (the default is to go to your spouse, then blood relatives), and being able to have a say in the event of a medical emergency. I can't tell you the number of stories I've heard of same-sex partners pre-2015 who were not allowed into an emergency room because they weren't married, or who were completely shut out of death arrangements and inheritance by bigoted parents. There is *so* much more to legal marriage than just taxes. – David K Mar 04 '20 at 19:18
  • Good answet. But on the emotion question, I mentioned the possibility of religious or non religious commitment ceremonies -- and expensive rings could be exchanged too--to cover the personal feelings aspect, leaving open the financial question. – Joshua Fox Mar 04 '20 at 19:58
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    @JoshuaFox The availability of non-legal ceremonies is almost totally irrelevant to the question. There's huge parts of property, and health law tied up with legal marriage. I haven't run the numbers yet, but taking the tax inefficiency from this answer, that amount of money will be wiped out a dozen times over easily should you encounter just one of the things lack of legally recognized marriage makes simpler and cheaper. – Leliel Mar 04 '20 at 22:14
  • @DavidK I hope that I don't need to show proof of marriage to enter the emergency room if my spouse is being treated there :-O – gerrit Mar 05 '20 at 09:30
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    @DavidK not being required to designate a beneficiary for all of your assets - goes against the generally accepted advice that everyone should have a will - pick your result. – Mindwin Remember Monica Mar 05 '20 at 14:12
  • @JoshuaFox I think you're wrongly assuming that those things would "cover the personal feelings aspect". I'm guessing that most people would still want to "make it official". – JLRishe Mar 05 '20 at 15:10
  • Good answer. Also job situation can change. From losing a job or becoming disabled, to deciding you have enough in the bank to start a business, become a full time artist or a stay at home parent, the "dual high income" situation is far from guaranteed permanent. – Meg Mar 05 '20 at 15:54
  • Good point about the tax law changes. I think the AMT exemption had been one of the most egregious marriage penalties for upper-middle-class couples, but the threshold is much higher now. – wrschneider Mar 05 '20 at 16:52
  • If your marriage isn't approved by the government, then you aren't truly married. The only crucial factor in any marriage is whether or not you have a government approved document that states you are married. – john doe Mar 05 '20 at 17:42
  • @Mazura No you aren't. – user3819867 Mar 06 '20 at 13:47
  • I suspect your claims on tax inefficiency are wrong in many common cases, due to several common deductions not scaling for married couples. Off the top of my head, I can name dependent care FSAs (that have a cap of $5000, where two singles could each have one, but married couples can only have one) and the state/local tax deduction cap ($10K, whether married or not, which makes it far less likely for married couples to exceed the $24K standard deduction, where two higher-income singles in a higher tax state could each hit the $12K standard deduction easily). – ShadowRanger Mar 07 '20 at 03:19
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In addition to Pete's answer outlining the legal and other benefits of marriage, I would add the financial benefit of being able to transfer money and assets between the spouses without incurring gift tax. This could greatly outweigh the higher taxes.

lizziv
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I'll add an answer from the numbers point of the view - what exactly is the potential inefficiency?

This answer's going to use the 2019 Tax Computation Worksheet for taxable incomes over 100k, and checking the difference between two incomes filed separately versus one filing jointly.

Let's get started!

T-Income A  T-Income B   Inefficiency Amount
100k        100k         $0
            200k         SAVINGS of $3142
            300k         SAVINGS of $7735
            400k         SAVINGS of $7981
            500k         SAVINGS of $7981

200k        200k         $0
            300k         SAVINGS of $123
            400k         SAVINGS of $123
            500k         $1630

300k        300k         $0
            400k         $1753
            500k         $3753

400k        400k         $3753
            500k         $5753

500k        500k         $7753

The reason for the inefficiency comes down Column D:

Tax Computation Worksheet

You'll notice that the Percentages in column B line up. If the two people are making a million dollars a year, it doesn't matter percentage-wise how they file: they're taxed at 37%. The only difference is that Subtraction amount in Column D. Which means the most that the inefficiency can be is $8165 (because that's 35012.5 x 2 - 61860)

And while $8165 sounds like a lot for an inefficiency... I'm not making $600k/year (nor is my spouse.) And I'm not looking at a tax burden of about around a third-of-a-million dollars.

Short Story: The absolute worst case for inefficiency is for two people earning about $510k/year each, which translates to... an additional 2.6% of tax paid. So at that point, you're making a major life decision on whether it'll get you a "Pay only 98% of your taxes" coupon.

Kevin
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Children. It's really that simple. It sometimes transcends money at that point.

Edit:

In response to the 18 upvotes on a "care to explain" comment, there are plenty of legal protections and rights that are established automatically for legally married couples when they have kids. Since laws are free to change, sometimes drastically and due to court interpretation, why take a chance?

I mean, people buy term insurance knowing that they most likely won't ever need or have use of it. They know the insurance companies are going to pocket more than they give out. Yet, people still want downside protection. Think of marriage as insurance against stupid laws.

wheaties
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    Last I checked, marriage was not a prerequisite for parenthood. Care to elaborate? – Nuclear Hoagie Mar 04 '20 at 20:56
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    I think they are implying that some believe it is moral to have a formal legal commitment that's harder to back out off in order to provide more stability for their children. – Mark Rogers Mar 04 '20 at 22:03
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    Or, it could come back to money, as a father actually has greater protections as the married parent of a child. If the father is not married to the mother, the mother could sue for child support, which could lead to wage garnishment, this would not happen while married. Also, a child (or guardian ad litem for the child) could sue the unmarried father for post-minority support (i.e. college tuition), but a child of married parents does not typically have the same recourse. And yes, this is an odd unequal protection under the law for children of married parents vs unmarried. – Glen Yates Mar 04 '20 at 22:44
  • @GlenYates Mothers can also be compelled to pay child support. – lizziv Mar 05 '20 at 16:44
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    It's not about moralities or being a prerequisite. In the case of death of one parent, the only way to guarantee that the other parent keeps the child is marriage. Otherwise, family of the deceased can contest guardianship. – Arielle Lewis Mar 05 '20 at 21:04
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    Agreed with your edit: Friend didn't get married, father of child died. Friend was not able to take time off for death of spouse, has been fighting SS for benefits, pensions, etc. Marriage would have solved that. Miserable perhaps, but... – J.Hirsch Mar 06 '20 at 19:54
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One good reason is that your spouse can not be forced on the stand in court against you. Your spouse should be someone you are able to trust and be open with. This gives your the legal ability to do so without worry. Money is less important than trust.

Drhowell440
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    The spousal privilege is asserted by the spouse, i.e. they can choose to testify if they want (as opposed to , as opposed to attorney-client privilege, where they can't testify even if they want to). So if your trust is misplaced, the privilege won't help you. And I don;t think for most people contemplating marriage, "Will this help me do crime better?" is a primary consideration. – Acccumulation Mar 06 '20 at 21:49
  • Not a primary consideration by any means, but I like to have all of the facts when I consider anything. – Drhowell440 Mar 10 '20 at 00:59
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Comparison shop two employers' health insurance total costs. Before kids, two singles on the plans our employers offer was slightly cheaper than one family, but now that we have a kid, we are better off under one family plan than a single and head of household on the order of $40 per biweekly payroll period, approximately $1000 a year. My employer's ER and specialist co pays are slightly cheaper, but my wife's Rx formulary is wider (hint: if you're operating from a position of knowledge for a specific condition look deep) and Rx copays cheaper, which adds up once you have routine prescriptions. We get the option to choose each open enrollment based on plan changes and what we know about our health.

Other benefits too: My wife's defined benefit pension has a spouse lifetime payout feature.

user662852
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My salary is six figures, and I'm marrying someone who makes twice as much. Why bother?

As mentioned, if you do the math, the "marriage penalty" is not actually that bad. Under current tax policy, we break even. Maybe that changes in the future, but who knows. It could change in the other direction too.

Also, yeah, we didn't do the math until we'd already decided to get married. It was an emotional decision. The math would have had to be REALLY bad in order to change our minds.

The other legal benefits might also be worth it, even if the math is against you. I'm slightly old-fashioned; if you want me to sign a mortgage with you, have your babies, or otherwise enter a multi-decade commitment, I'm going to need a signed contract outlining our rights and responsibilities in this partnership. We've been together for eight years, and we're at the stage of life where mortgages and babies are an option. We're in our thirties and hopefully will not need the legal next of kin stuff anytime soon, but it's not irrelevant either.

Cedrus
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