Each year, about 2 million Americans get married, according to figures from the National Center for Health Statistics. No doubt all those newlyweds — or at least most of them — believe tying the knot will make them happier. What they might not think about is whether it could also make them wealthier.
A 2005 study from The Ohio State University (OSU) found that people saw a sharp increase in their level of wealth after getting married. After 10 years of marriage, the couples reported an average net worth of around $43,000 compared to $11,000 for people who had stayed single.
However, people who had married and then divorced were worse off than any other group. After a divorce, the average man was left with $8,500 in assets, while the average divorced woman had only $3,400.
As this study shows, getting married has risks as well as benefits. Furthermore, many factors play a role in how marriage affects your finances. The benefits of marriage vary based on your income, your living situation, and (most of all) whether you have children.
As a result, it’s impossible to say that married people are always financially better off than single people or vice versa. What is possible is to examine the financial pluses and minuses of marriage and figure out how they might affect you, either now or in the future.
Costs and Benefits of Marriage
The OSU study doesn’t explore the reasons married couples can sock away more money, but the author, Jay Zagorsky, suggests several possibilities.
Married couples can save money by sharing household expenses and duties. Additionally, couples enjoy many benefits single people don’t when it comes to insurance, retirement, and taxes.
But being married carries some financial costs as well. For example, weddings are a significant expense for many couples. Also, the tax laws that benefit some couples result in a penalty for others. And finally, there’s always the risk a marriage will end in divorce, which is one of the biggest financial setbacks you can suffer.
Many couples start married life with a substantial one-time expense: a big wedding. According to a 2021 LendEDU survey, the average wedding in the United States costs over $10,000. A 2019 survey by The Knot came up with an even higher average: nearly $30,000. Either way, it’s a lot to spend on a one-day event.
More troubling still is that many couples go into debt to pay for their big day. About 1 in 3 couples in the LendEDU survey borrowed money for wedding costs. These couples spent more — close to $18,000, on average — and borrowed nearly two-thirds of that.
That’s a big problem for both their finances and their future happiness. A 2012 study by the New Economics Foundation shows that people who have credit card debt are generally unhappier, and unmanageable debt can lead to mental problems like anxiety and depression.
The Marriage Penalty
After the honeymoon is over, married couples come home and settle into a new routine together. One of the changes many newlyweds have to adjust to is filing a joint tax return. And in certain cases, that means dealing with the marriage penalty.
The marriage penalty exists because tax brackets — the income levels at which tax rates shift — aren’t always exactly twice as high for couples as they are for single people. As a result, couples who file their taxes jointly sometimes pay more than they would as two single people.
The Tax Cuts and Jobs Act of 2017 eliminated the marriage penalty for most Americans. However, it can still apply to couples making over $622,050 per year. They pay a higher percentage of that income in taxes than a single person making $311,000.
But even high-income couples don’t always pay this penalty. If one spouse earns all or most of the income, the couple may get a “marriage bonus” instead. In other words, they pay less in taxes for their joint income than they would individually.
Ironically, very low-income couples can also face a marriage penalty. That’s because people who qualify for the earned income tax credit (EITC) get less money back when they file a joint return.
In 2020, a childless couple with a combined income of $17,000 would get only $359 from the EITC. By contrast, two single people making $8,500 would each get $538. Getting married would cost this low-income couple $717 — about 4% of their total income.
Other Tax Issues
Leaving the marriage penalty aside, married couples definitely get some tax perks that aren’t available to single people. These include:
- Extra Deductions. Even if your income doesn’t double after marriage, your income tax deductions can. The standard deduction the IRS allows for couples is exactly twice as high as the deduction for single people. These doubled deductions effectively give a bonus to couples with one nonworking spouse who wouldn’t file a tax return otherwise. They get to take a deduction for both spouses rather than just the one who’s working.
- Estate Taxes. If you leave behind a substantial estate when you die — “substantial” meaning $11.7 million or more in 2021 — the government skims an estate tax off before the money passes to your heirs. But any money you leave directly to your legal spouse is exempt from this tax. If you have $20 million and leave it all to your spouse, the government can’t touch a penny of it.
- Gift Taxes. Some people try to get around the estate tax by giving large sums of cash to relatives before they die. To close this loophole, the IRS charges a gift tax on any gifts of $15,000 or more. However, like the estate tax, this tax doesn’t apply to your spouse. You can give your spouse any sum of money — or other valuable items, such as jewelry — without paying tax on it.
- Home Sales. When you sell your home, you don’t have to pay capital gains tax on the first $250,000 of profit if you’re single. But if you’re married, and you and your spouse have both lived in the house for at least two of the last five years, this exemption doubles. That means you can make $500,000 on the sale of your home and pay no tax at all.
Married couples often have more choices for health insurance coverage. If employers of both spouses provide health plans, they can each keep their own workplace coverage or they can both join one spouse’s plan. That gives them more options to choose the doctors they prefer or save money on premiums.
If one spouse doesn’t have health coverage from work, health benefits are even more critical. Getting married makes it possible for the uninsured spouse to get coverage through the other spouse’s employer. That’s usually more affordable than paying for an individual policy.
Married couples have more options when it comes to retirement benefits as well. These include:
- IRA Contributions. If you’re single and unemployed, you can’t contribute to an individual retirement account (IRA). However, if you’re a stay-at-home spouse, you can set up a spousal IRA and contribute from your joint income.
- Inherited Benefits. In many cases, if you inherit another person’s Roth IRA, you must start making withdrawals from it promptly. But if you inherit your spouse’s Roth IRA, you have the option to transfer it to a Roth IRA in your own name and make no withdrawals until you retire.
- Social Security. Married couples have many more options for collecting Social Security benefits. You can either collect your own benefits or take a payment equal to 50% of your spouse’s benefit — even if that’s more than you’d be entitled to on your own. You can also choose to delay your own benefits to increase the payout and take the spousal benefit in the meantime. Even a nonworking spouse who has never contributed to Social Security at all can still collect spousal benefits.
The Risk of Divorce
Perhaps the greatest financial risk of getting married is the possibility of ending up divorced. While being married is generally better for your wallet than being single, getting a divorce cancels that benefit — and then some.
The OSU study shows that on average, divorced people have 77% less wealth than single people in the same age group.
Interestingly, the drop in a couple’s fortunes doesn’t happen immediately after the divorce. In fact, the couple’s wealth usually starts to decline about four years before they end the marriage.
Zagorsky, the author of the study, says that could happen because many couples separate before they officially divorce, taking on the additional cost of maintaining separate households. Another possibility is that the stress of a failing marriage hurts each spouse’s ability to work and earn money.
The impact of divorce continues long after a couple splits up. The newly single people see their wealth start to creep upward again within a year, but it doesn’t increase very fast. Even 10 years after a divorce, their median wealth is still below $10,000 — less than the $11,000 average for people who stayed single.
The Role of Parenthood
Bringing up children is a huge expense. The 2017 U.S. Department of Agriculture (USDA) Expenditures on Children by Families report shows that a family with a child born in 2015 can expect to spend more than $233,000 raising that child to adulthood.
Decades ago, this cost seldom affected single people. An analysis by the Pew Research Center shows that in 1968, only 7% of parents living with a child were unmarried. By 2017, 1 in 4 parents living with children was single, and 1 in 4 children lived with just one parent.
And in 2019, 40% of all babies were born to single parents, according to the Centers for Disease Control and Prevention’s National Vital Statistics Report.
Having children is a financial game-changer for both single and married people. Child care and increased housing costs eat up a large share of any parent’s income.
However, there’s no doubt that raising kids is easier with two people to share the burden. Not only do couples tend to have higher incomes, but they also have more choices for dealing with child care.
Child Care Costs
A 2021 survey by Care.com found that more than half of all families spent over $10,000 on child care in 2020. For a family with two children in day care, the average cost is $640 per week — over $30,000 per year. More than 85% of parents say they spend at least 10% of their income on child care.
However, for many married couples, there are ways of avoiding this cost. Couples have options that aren’t available to most single parents, such as:
- Stay-at-Home Parenting. Some parents avoid child care costs by having one spouse quit working at least for a year or so to care for the children full-time. Mothers are more likely than fathers to take on this role. A 2018 Pew study found that in 2016, 27% of all mothers were stay-at-home moms and 7% of fathers were stay-at-home dads.
- Work-at-Home Parenting. New technologies, such as email and teleconferencing, make it possible for some parents to work from home. Although this job arrangement is sometimes possible for single parents, couples with two jobs have double the chance of making it work. It’s also easier when the other parent has a full-time job since many work-at-home opportunities are freelance, and freelance jobs often have unpredictable income and no benefits.
- Split-Shift Parenting. Some parents choose to adjust their schedules so one of them is always at home with the kids. For example, one parent works the overnight shift and returns home before the other leaves for work in the morning. Split-shift parenting means both parents get to spend time with their children, but it leaves them very little time to spend with each other, which can strain the marriage.
According to the USDA report, housing costs are the single most significant factor in the cost of raising a child. For married, middle-income parents, nearly 30% of the money spent on a first child goes toward increased housing costs. Child care and education account for only 16%.
Part of the reason for this is that a bigger family simply needs more space. A family with two children needs at least two bedrooms, preferably three, while a single person or a couple with no children can get by with one.
However, parents also tend to pay more for housing because they want their kids to go to the best schools, and homes in these school districts tend to be expensive.
Every year, the education review website Niche names the top school districts in the country. It also provides links to nearby homes for each district. In 7 of the top 10 districts for 2022, a three-bedroom home costs at least $380,000. By contrast, Zillow puts the typical home price for the whole country at just over $308,000.
Fortunately, there are some exceptions to this rule. For instance, the top school district on Niche’s list is in Lincolnshire, Illinois, where three-bedroom homes start at around $290,000. And in No. 4 Vernon, Illinois, they can go for under $170,000.
Websites like Finder and 24WallSt have identified affordable neighborhoods with good schools throughout the U.S. Choosing a home in one of these neighborhoods can help parents keep their housing costs in check while still giving their children an excellent education.
Tax Breaks for Parents
Because raising children is so expensive, the IRS provides an array of tax breaks for parents to help offset the cost. These include:
- The Child Tax Credit. This credit reduces parents’ taxes by up to $2,000 per child. Married couples with combined incomes up to $400,000 can take the full amount. So can single parents with incomes up to $200,000, regardless of whether they file as single, head of household, or qualifying widow or widower. Above these income levels, the credit gradually shrinks. Since the amount for a couple is twice the amount for an individual, this perk is exactly as good for single or married parents.
- The Child and Dependent Care Tax Credit. Parents who have to pay for child care can deduct a portion of these costs through the child and dependent care tax credit. This credit provides up to $3,000 for the care of a child under 13 and up to $6,000 for two or more. There’s no income limit for this tax credit, but the percentage of your costs you get back is lower for higher incomes. It starts at 35% for incomes up to $15,000 and gradually drops down to 20% for incomes of $43,000 or more, no matter your filing status. That means a single parent with a $30,000 income who pays $10,000 per year for day care, could get back 27% of that amount, or $2,700. By contrast, a married couple with a $60,000 income and the same day care expenses would get back only 20% of the cost, or $2,000 — just $1,000 per person.
- Flexible Spending Accounts. Parents can also offset their child care costs by using a flexible spending account (FSA) if their employer offers one. With an FSA, a parent can set aside up to $5,000 in pretax dollars for child care. It’s an alternative to taking the child and dependent care tax credit in most cases. However, parents who have two or more children and child care expenses of more than $5,000 per year can do both. They can set aside $5,000 in an FSA and claim a tax credit for up to $1,000 in costs over that amount.
Having a child also increases the amount you can get from the earned income tax credit. The maximum credit for people with no children is $1,502 for tax year 2021. However, this amount jumps to $3,618 for people with one child and maxes out at $6,728 for parents with three kids or more. These numbers are the same for single and married parents.
Having kids makes it easier to qualify for the EITC as well. A single person with no children needs an income of $21,430 or less to qualify, but a single person with one child can qualify with up to $42,158 in income. For a married couple, the limits are $27,380 with no kids and $48,108 with one. Additional children increase these limits still more.
The IRS’s EITC Assistant shows how the EITC differs for single parents and married ones. For the tax year 2020, a married couple with two children at home and an adjusted gross income (AGI) of $40,000 would get $2,802 from the EITC — just $1,401 per person.
By contrast, a single person with two children at home and an AGI of $20,000, filing as head of household, would get $5,774. So this is a case where the marriage penalty deals a big blow to married couples.
Tax Filing Status
Most tax credits are available both for couples who file joint returns and single parents who file as head of household. Parents who file as head of household have lower tax rates than other single people, and they can also take a higher standard deduction. Compared to married couples, they pay more in taxes for the same amount of income, but they still end up paying less per person.
For example, suppose a head of household earns $60,000 per year and takes the standard deduction, the child tax credit, and $2,000 from the child and dependent care tax credit. After these deductions and credits, this person would owe $660 in taxes on that income.
A married couple with the same $60,000 in income between them using the same deductions and credits would pay no tax at all. However, a married couple where each spouse earned $60,000 for a combined income of $120,000 would pay $8,375, more than 10 times as much as the single head of household.
In short, this is a case in which single parents get a much-needed break.
Sharing a Home
OSU study author Zagorsky speculated that the reason married couples save more than single people could be that they’re more likely to share a household. By sharing expenses such as rent, food, and utilities, they can spend less than two single people who live alone.
The annual Consumer Expenditure Survey conducted by the Bureau of Labor Statistics supports this theory. It shows that the average single person spends $45,701 per year, while the average two-income couple spends $78,249. By combining their expenses, the couple saves $13,153 each year.
However, these benefits aren’t just for married couples. Single people can get them by sharing a home with a roommate, a family member, or a significant other. Sharing a household is one of the best ways for single people to close the wealth gap and start saving early for big expenses down the road.
According to an old saying, “Two can live as cheaply as one.” That’s not exactly accurate, but it’s definitely true that two people living together and sharing all their expenses can live more cheaply than two people maintaining separate households.
Housing costs are a good example. Suppose two people live in identical one-bedroom apartments, each paying $1,620 per month — roughly the national average, according to Rent.com. If they move in together and share just one of these apartments, they immediately cut their rent in half.
Even if they upgrade to a two-bedroom apartment to give themselves more space, they can still cut their total housing bill by a sizable amount. The average monthly rent for a two-bedroom apartment is only about $1,880, so they’d still cut their costs by about 42%.
People sharing a household can save on all sorts of other expenses as well. It’s easier for them to buy groceries in bulk — for instance, getting a gallon of milk instead of a half-gallon without worrying it’ll go bad before they finish it. They can share one landline phone bill, combine their home insurance policies, and share loads at the coin laundry.
All these savings can add up to thousands of dollars each year.
People who live alone also have to do all the work of maintaining the home by themselves. Keeping up with household tasks like cleaning, cooking, and laundry can feel overwhelming.
After a while, it’s tempting to hire someone else to take care of it — and that can get expensive. According to Angi (formerly Angie’s List), the average cost of a house cleaning is around $170. Getting one every two weeks would come to $4,420 per year.
By contrast, living with a partner or a roommate can ease the burden on both of you. If one person cooks dinner, the other can do the dishes. If one does the laundry, the other can clean the bathroom. Since cooking or cleaning for two people doesn’t take much longer than doing it for one, that cuts way down on the amount of time these chores take.
People who live alone also spend more in less obvious ways. For instance, when you’re going through a crunch at work, you often get home late and don’t have the time or energy to cook. If you share your home, you can ask your partner or your roommate to take over the cooking until your work crisis is over.
But if you live alone and don’t have this option, you’re more likely to end up eating out at restaurants every night. Eating out costs a lot more than cooking at home — anywhere from $5 for a burger and fries at McDonald’s to $100 or more at a French bistro.
Alternatively, you might turn to convenience foods from the grocery store, such as frozen dinners, to get you through your busy period. These are cheaper than a restaurant meal, but they’re still far more expensive than cooking from scratch.
There’s no doubt marriage offers some advantages compared to being single. However, both financially and emotionally, it’s much better to stay single than to marry the wrong person. Marrying someone who doesn’t share your values and goals is a good recipe for a bumpy marriage and a painful and expensive divorce.
So if you’re single now but plan to marry someday, the most important thing you can do is choose your partner carefully. Ensure you understand and agree with each other’s financial goals so you’re working together and not against each other.
And if you’re already married, it’s not too late to have this conversation. By taking the time to talk about your financial needs and goals, you can keep your marriage and finances strong.