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It may sound highly pragmatic to plan your wedding around taxes, but for many, the financial benefits of marriage are a key consideration before walking down the aisle. Your wedding date can influence how much you owe the IRS, so understanding the tax consequences of marriage is crucial to avoid any unexpected tax bill (or windfall) when tax season arrives.
Here’s what you need to know.
Determine if you'll face a tax bonus or penalty
Depending on your earnings, you and your spouse could either receive a marriage bonus or a marriage penalty once you're married.
Most couples enjoy a bonus, meaning they pay less in taxes by merging their incomes. This is especially common when the partners' earnings differ—the lower-earning spouse brings the higher-earning one into a lower tax bracket—or when only one person is bringing in an income.
On the other hand, some couples face a penalty, as their combined income pushes them into a higher tax bracket. This often happens when both partners have similar high or low earnings. The 2017 Tax Cuts & Jobs Act made the marriage penalty somewhat less burdensome, except for earners in the highest (37%) tax bracket—those making $622,050 or more in combined income when filing jointly. However, couples with comparable incomes can still incur a penalty.
As per an analysis from the Tax Foundation, marriage bonuses can reach up to 21% of your combined income, while marriage penalties max out at about 12%.
We’ve covered taxes and marriage in detail, but when it comes to choosing the best time to marry, all you really need to know is whether you’ll receive a bonus or a penalty. The Tax Policy Center’s handy marriage calculator will do the calculations for you.
The IRS views you as married for the full tax year
When filing your taxes for the first time after getting married, you might be surprised to find that even if you wed in December, the IRS considers you married for the entire year. (The same applies if you get divorced. If your divorce is finalized on December 31, the IRS sees you as divorced for the full tax year.)
In other words, your filing status for the whole tax year is determined by your marital status as of December 31. This rule often surprises many couples facing the marriage penalty, as they end up owing more than they expect, especially if they get married toward the end of the year.
On the flip side, if you’re receiving a marriage bonus, this rule works in your favor. You’ll benefit from the bonus for the whole year, whether your wedding was in January, July, or December.
How to select the best wedding date based on your potential penalty or bonus
If you fall under the marriage penalty, timing your wedding early in the year could help you save on taxes. For instance, if you marry in October 2020 and find yourself pushed into a higher tax bracket, you’ll face higher taxes starting with your 2020 filing (due in April 2021).
However, if you wait a few months and marry in January, the impact of your new, higher tax bracket wouldn’t kick in until 2021, saving you a full year of higher taxes.
Of course, this decision involves more than just taxes: there’s the cost of the venue, travel expenses for guests coming from afar, and specific tax benefits available when you marry and file jointly—even if you face a penalty, like a higher exclusion amount on your home sale. Delaying your wedding means missing out on those perks for the year as well.
On the other hand, if you’re due for a bonus, you could marry earlier to maximize your tax advantages. For example, you might move your January 2021 wedding to December 2020, allowing you to gain an extra year of tax savings and benefits. (Of course, that also means celebrating a wedding during the holidays, which might not sound so ideal.)
Review your withholding before the big day
Regardless of when you get married, it’s essential to understand how your change in marital status will affect your withholding and your overall tax bill.
Robert Westley, a CPA and member of the American Institute of Certified Public Accountants (AICPA) Financial Literacy Commission, advises waiting to adjust your withholding until after the wedding. If you alter your withholding early in the year and then decide not to marry by December 31 (perhaps due to a wedding delay caused by a global pandemic), you could end up facing unexpected interest and penalties, he warns.
However, you can adjust your withholding earlier if you choose. If you expect to face a penalty for the year, making changes to your withholding early can help you avoid a large, unexpected tax bill in April. If you anticipate receiving a bonus, adjusting your withholding now ensures you don’t overpay throughout the year.
To determine whether you need to adjust your withholding, enter your anticipated filing status into the IRS' tax withholding calculator. If you believe your tax liability will shift significantly after your wedding, ask your employer if you can modify your W-4 to reflect the necessary changes in allowances.
The more allowances you claim, the less tax will be withheld from your paycheck. If you’re facing a penalty, you’ll want to reduce certain allowances, which will result in higher taxes withheld throughout the year—ideal for avoiding a large tax bill when April rolls around.
Understand when it’s better to file separately
Westley explains that, in most cases, couples gain more from filing jointly, as filing separately typically leads to a much larger tax bill. However, there are certain situations where filing separately might be more advantageous—such as if one partner has substantial unreimbursed medical expenses or if one or both partners are enrolled in an income-driven repayment plan for student loans.
This is why it’s crucial to have a full understanding of your financial situation before making any significant changes to your tax strategy.
While most people don’t plan a major, likely once-in-a-lifetime event around tax considerations, it’s still helpful to know how your wedding date will impact your finances beyond the cost of the event itself. Especially if you’re facing a penalty, being prepared for these changes can make a big difference.
