“Goin' to the chapel and we're gonna get married” – Marriage is more than just a song - Reap the financial benefits!
When the Dixie Cups performed the “Chapel of Love” song and when Bruno Mars performed and co-wrote the song “Marry You”, I think the furthest thing from their mind were the financial benefits of getting married, and rightfully so. You would need to have been raised under a rock to never have heard these songs which exude romance and make hearts melt. However, I do work in an accountancy firm so I will be focusing on the financial benefits of marriage, rather than focusing on butterfly’s, song birds and all that romantic stuff – down with that sort of thing!
I chose to write on this topic as I have a particular interest in it - I got married less than 3 months ago. I was always quite cynical about marriage, and more particularly the day itself, not even a day! I always believed it was nonsensical the amount of money people paid for just 1 day and was uninspired by the predictability of the time – tabled fashion in which it is generally held. My opinion was formed from having seven older siblings, from being bridesmaids on a number of occasions for family and friends and from attending a lot of weddings. Don’t get me wrong. I had a fantastic time at all of those weddings and was honoured to get wedding invites, but just could not get it, as in, I could not get why a couple would spend a ridiculous amount of money on 1 day. Not to mention tv shows such as Bridezilla and Don’t tell the Bride which to me highlights that the purity and true importance of getting married is so often lost in the immaterial and frivolous detail.
Then on the 4th of January 2019, my wedding day, I got it…...I completely got it. Money did not exist in my mind on the day. Every cent that went on the wedding was so worth it. It was the most amazing day of my life. Although it felt like I was abducted by aliens for a couple of hours on the day as time was simply erased and was stolen from me as I wandered through the reception bursting with blissful happiness in a haze of joy. The day commenced with doing the robot dance with my two bridesmaids whilst waiting for an early morning breakfast at a trendy café in Cork City in my deliriously emotional and ecstatic state to saying “I do”, skipping through to the meal, to dancing to our first song, to doing a further duet with my husband in the early hours and then it was sadly over. But the feelings and the emotions that I experienced on the day were truly better than winning any lotto for me and they are something that I will cherish for a lifetime.
Anyway back to business on the financial benefits of marriage, before you potentially reach for the bucket or before I bore you to tears.
Tax on Income
With marriage brings greater flexibility in that you can elect to be taxed in the way that will yield the best possible tax advantage given your personal circumstances. The options open to you are:
- Joint assessment - This means that you will be taxed as one unit and allowed some tax concessions not used by one spouse to be transferred to the other.
- Separate assessment - This is very like joint assessment except that all the available allowances are split evenly between you and your spouse.
- Single assessment - This is where you and your spouse decide to be treated as if you were two single people for tax purposes.
The benefit of joint assessment is the ability to transfer tax bands and credits between husband and wife. This means you can reduce the amount of tax you have to pay at the higher rate, which could be a significant saving.
The standard cut-off point for married couples in 2019 is €44,300. This amount is taxed at 20% and the balance is taxed at 40%. Where both spouses have income, this standard rate cut-off point can be increased by the lower of the following:
- €26,300 in 2019 or
- The amount of income of the spouse with the smaller income.
Therefore a married couple can earn up to €70,600p.a, paying tax at 20%, before the higher tax rate of 40% kicks in.
This is particularly beneficial in the case of a two-income couple where one spouse earns more than the other. Under normal circumstances, the Revenue Commissioners will assume that you wish to be taxed under joint assessment, and will calculate your tax liability accordingly. However, take advantage of all the allowances and tax credits open to you and choose the option that produces the best return for you.
Many couples can make a saving however a lot of married couples are no better off tax wise. It all comes down to how much a couple earns. You can potentially make a saving in certain circumstances such as:
- Both spouses are working but only one spouse pays tax at the higher rate (40%);
- Both spouses are working and one spouse has unused credits;
- Only one spouse is working;
- One spouse cares for children in the home;
- You are disposing of assets or making investments.
In the year you are married, both you and your spouse will continue to be treated as single people for tax purposes. However, if the tax you pay as two single people is greater than the tax payable if you were taxed as a married couple, you can claim the difference as a tax refund. Only tax deducted in the months after marriage can qualify for a tax refund, and refunds are typically granted the following year. So if you get married in 2019, like me, for example, your refund will be calculated after 31st December 2019 which represents the Revenue Commissioners belated wedding present to the happy couple.
Home Carer Tax Credit
This tax credit is given to married couples who are jointly assessed for tax, where one spouse or civil partner works in the home caring for a dependent person. It could be an older relative or even the children of the couple. It is worth €1,500 for 2019 if the stay-at-home earns less than €7,200 p.a. You cannot claim both the increased Standard Rate Cut-Off Point for dual income couples and the Home Carer Tax Credit.
Capital Gains Tax (CGT)
Gains made on profits from selling an asset, for example a house, are currently taxed at 33%. If you are married assets can be transferred between husband and wife without being subject to CGT. Also any capital losses made by one spouse may be used by the other spouse to reduce a capital gains tax bill.
Capital Acquisitions Tax (CAT)
Any gifts or inheritance given by one spouse to another are free from CAT which is currently at 33%. For cohabiting couples your partner is effectively treated like a stranger for CAT purposes as you are not blood relatives and not married. This means that the most that a partner in a cohabiting relationship may inherit from the other tax-free is currently €16,250 with the balance of the inheritance subject to tax at 33%. In this scenario if, for example, the property you lived in with your deceased partner is owned solely by your partner, you could find yourself in a situation where you have to sell the family home to settle the inheritance tax bill.
Stamp Duty
If you are married you do not have to pay stamp duty when you transfer assets to your spouse.
Succession Rights
Although I am still in my happy honeymoon phase I think we need to include succession rights. Being married can protect your rights to inheritance. If you are married and your spouse dies and there is a valid will, under the Succession Act 1965 you have an automatic right to a 'legal right share' despite what your spouse may have specified in his/her will. The 'legal right share' is:
- One-half of the estate if there are no children;
- One-third of your estate if there are children.
Therefore, if your spouse has bequeathed you less than your 'legal right share' entitlement, you may still claim your right to your minimum 'legal right share'. You do not have to go to court; the executor or administrator is obliged to grant you your share. This 'legal right share' entitlement will apply so long as you have not already renounced or given up your right to the estate and so long as you are not deemed "unworthy to succeed". For example, the surviving spouse has not had committed murder or a serious crime against the deceased or if the spouse had deserted the deceased for at least two years before death. Of course if your husband/wife leaves you everything, you are entitled to everything; so long as your child does not challenge the will arguing that their deceased parent failed in his/her “moral duty” to make proper provision for the child in accordance with his/her means.
If you are married and your spouse dies intestate without leaving a will or a valid will, the rules for the division of property on intestacy are as follows:
- Spouse gets entire estate if there are no children;
- Spouse gets two-thirds, one-third is divided equally between children.
Life Assurance
Although life insurance benefit is paid out as a tax-free lump sum, whoever inherits the money after your death, depending on their relationship to you, may have to pay inheritance tax. The amount of tax they pay depends on how much they inherit; their relationship to you; other gifts and inheritances they may already have received and Revenue rules at the time of your death. There is no tax liability on sums received from spouses. Your life cover benefit will be paid tax free if the beneficiary is your wife/husband.
I was telling my Italian friend Giovanni who lives in Cork about this article that I am writing and Giovanni, being the typical romantic Italian, jokingly said that he needs to marry an Irish lady to potentially increase his annual net salary and to fall in love with too, of course. However, for all of you budding brides to be and grooms to be intending to pop the question or say I do, it is important to remember that deciding to get married is one of the biggest decisions that you will ever make and I’m not suggesting that you get married for the potentially generous financial benefits and tax breaks as the title of this article states. Rest assured that by getting married there are financial benefits to be made whether it’s an increase in your net pay or for CAT or CGT purposes. And if this article is too hopelessly positive and one sided in only focusing on the financial benefits of marriage, well sorry I can’t help it. I’m simply a newly-wed joyfully living in the honeymoon phase of life. Its still butterfly’s and song birds for me. Don’t steal my sunshine; negative thoughts are not on my radar!
