3 Circumstances in Which Marriage Could Hurt Your Finances

Editor's Note: This story originally appeared on The Penny Hoarder.

You always hear that walking down the aisle has financial benefits. While it’s true that sharing a household cuts down on expenses, you don’t necessarily have to get married to reap those cost-saving benefits.

And even though marriage can bring your car insurance premiums down, the financial benefits administered by our government tend to give marriage bonuses to married couples who are better-off, while inflicting marriage penalties on those who are lower-income.

If you are lower-income, don’t just assume that getting married will make your financial life better. Because in all reality, it’s likely to make things harder until you reach a certain income level.

We can see big marriage penalties when we look at areas like the Earned Income Tax Credit, SSI and Medicaid eligibility, and even widowhood.

Today we’re going to take a deep dive into how each of these scenarios can pan out.

Getting Remarried Later in Life Could Hurt Your Social Security

If you were married to a high-income earner and that person passed away, remarrying before age 50 or 60 could disqualify you from survivor benefits, which can be a big loss.

Let’s say your deceased spouse earned enough to qualify for a benefit of $3,627 a month, but you spent most of your prime money-earning years caretaking. Because you earned peanuts, the benefits in your own name would be peanuts. But you could claim survivor benefits based on the spouse’s income.

You’d get anywhere from 71.5% to 100% of the deceased spouse’s benefit depending on when you started claiming it. You’re entitled to this amount even if you were divorced at the time of death – as long as you were married for at least 10 years.

If you met your next great love at 49 and decided to marry again, that benefit would vanish into thin air. Even if your new spouse earned the same amount of money, entitling them to an identical benefit, you’d only get 50% of it until they passed away.

There is a way to avoid this remarriage penalty, though it involves waiting to exchange vows. Disabled people can get remarried from age 50 onward without losing spousal survivor benefits. Everyone else needs to wait until age 60 to walk down the aisle again sans penalty.

Marriage Tends To Pay at Higher Income Levels

Thinly veiled behind survivor benefits is the fact that higher-income married people tend to be favored in the tax and Social Security systems over lower-income single workers.

Marriage is less common at lower tax brackets. There are many arguments as to why, but one of them is surely the marriage penalties lower-income people tend to face when interacting with social welfare systems and our federal tax system.

“This huge widow bonus [with survivor benefits] doesn’t make a lot of sense,” said Eugene Steuerle, former Deputy Assistant Secretary of the Treasury and a co-founder of the Urban-Brookings Tax Policy Center.

“For much of Social Security’s history, single parents who worked paid more Social Security tax and got lower benefits compared to spouses – largely wives – who didn’t have to work because of their spouses’ incomes.

“They paid less tax, but got the higher benefit. The survivor benefit is a huge bonus for widowers that’s not available to low-income people who are deserving of support.”

Marriage Can Mean Life or Death in the Disability Community

For disabled people in America, marriage equality is a matter of life or death.

Some people are unable to work due to their disability. Others may find themselves having to limit their income in order to qualify for life-sustaining healthcare through Medicaid.

“Medicaid is incredibly important because it covers things that other insurance does not,” said Ayesha Elaine Lewis, Staff Attorney and member of the leadership team at the Disability Rights Education & Defense Fund.

“Medicaid eligibility can mean access to personal attendant care services and other supports, like durable medical equipment that keeps people alive. These are items and services not typically covered under private insurance. They allow people to live inside their community and outside of specialized institutions.”

Whether or not you’re disabled yourself, this is an issue we should all care about.

Not only is it ethically right to keep people in their own communities, but the societal costs of forcing people into institutions are more expensive than accommodating people in their own homes and neighborhoods.

There Are Marriage Penalties for Those on SSI

Many people qualify for Medicaid based on their SSI eligibility. In order to qualify for SSI as an individual, you can only make $1,470 a month.

Benefits are prorated based on income, with the maximum individual benefit topping out at $914 a month in 2023. You cannot hold assets valued at more than $2,000, which means you can’t really build a sufficient emergency fund.

When you get married, those income and benefit thresholds don’t double. In fact, they decrease by 25%. Whether your spouse is disabled or not, the maximum income a married couple could earn is a mere $2,460 a month, with a maximum collective benefit of $1,371 a month.

That means if two disabled people got married, they’d actually see a decrease in total SSI benefits.

If one of the partners wasn’t on SSI, their income and assets would still count against the disabled spouse’s eligibility – and maximum allowable assets for married couples is a mere $3,000.

The Government Will Pry

Lest you think living together outside the bonds of matrimony is a solution, know that it is not. The government gets all “Men In Black” about it.

If the Social Security Administration catches wind that you’re living as if you were a married couple even though you haven’t taken that legal step, they could still impose the marriage penalty.

If the household income is too high, that could mean losing access to your life-sustaining health care.

“Even referring to someone publicly as your partner is something many people are afraid of,” Lewis said.

“Many people refer to their relationships as ‘roommates’ or ‘landlords’ because there’s a fear if someone tips off the Social Security Administration, they might decide you’re ‘holding yourself out’ as a married couple and apply the penalties.”

Medicaid Buy-In States Could Be a Solution for Those Willing To Lose SSI Benefits To Marry

You may not be able to work because you simply can’t work. But there is a subset of people that could work more if they weren’t constrained by SSI’s income and asset tests.

If you need access to Medicaid, some states – like California and New Jersey – have Medicaid buy-in programs for the disability community. These programs still have limits, but they’re more generous than SSI.

You will have to pay a premium for Medicaid access that’s prorated based on your income, but that premium may be worth it if it allows you to escape the marriage penalties that come with SSI.

Not everyone can move. It’s especially difficult for people who are on a fixed income and aren’t allowed to save more than $2,000. It’s also important to note that having access to Medicaid coverage does not necessarily equal access to care.

Depending on the community, you might have coverage but no service providers, which defeats the point. Be sure to do your research before hiring a moving company.

The Rules for DAC Recipients Are Simultaneously Harsher and More Forgiving

If you’re on DAC – or Disabled Adult Child benefits – it’s because you’re claiming a Social Security benefit passed on to you by your parent. Depending on how much your parent worked and earned over their lifetime, you may be able to get a higher cash benefit than SSI while still maintaining access to Medicaid.

People on DAC are allowed to pretend they’re married. They’re allowed to have commitment ceremonies, wear rings and women can even refer to themselves as “Mrs.” with no fear of reprisal from the SSA.

However, they are rarely allowed to have the real thing. A legal marriage of almost any kind permanently ends access to DAC benefits, even if you later become divorced or widowed.

“There are few exceptions,” Lewis said, “like you can marry another person receiving DAC. You could also marry someone on SSDI or someone who is retired and receiving Social Security benefits that way, but most people in their 20s are not out to marry someone who’s 62 years old. It’s pretty limiting.”

The EITC Marriage Penalty Could Cost You Thousands

The way America treats its disabled citizens may be one of the most draconian ways it enforces marriage penalties, but you don’t necessarily have to be disabled for marriage to hurt your finances.

A big one for lower- to moderate-income Americans is the Earned Income Tax Credit (EITC).

This tax credit was birthed as a replacement for the Aid to Families with Dependent Children (AFDC) when that program was phased out in favor of TANF cash benefits.

The refundable EITC can be worth thousands of dollars, and can make up a large part of the annual household budget for lower- and moderate-income households.

“It started off to benefit families with children,” Steuerle said. ”

Single people were largely left out. Later on, they included a childless worker credit at low levels. Few people qualify for it, and it’s not very large. That evolution is creating a number of problems.”

How Marriage Can Affect EITC

For example, let’s say you’re a heterosexual couple with two young children back in 2021. You’re not yet married, but considering taking the leap. The mother earns $3,000 a month, for a total annual income of $36,000. The father works part-time so he can do more of the childcare work, and earns just $8,000 a year.

Because you’re not married, only one of you claims the children on your tax return and files as head of household. The other parent files as a single tax filer. We’ll assume the mother is claiming the children, as that is often the default for unmarried couples according to Steuerle.

The mother’s EITC would be $2,509 in 2021, and the father’s would be $534, bringing a grand total of $3,043-worth of tax credits into the home. But if you got married? The EITC would have bumped down to a grand total of $1,867 – or $1,176 less.

After marriage, the initial tax burden would have jumped up an additional $210, too, resulting in a final marriage penalty of $1,386 less in federal tax refund money.

“With the EITC, the benefit goes up, and then at some point it all of a sudden starts going away,” Steuerle said. “That effort to take it away or to limit its impact to a small group of people is basically like another tax rate structure. It creates all these problems.

“The biggest problem is I think we’ve gone overboard in terms of the impact on marriage penalties and bonuses. I don’t think they’re avoidable altogether, but they certainly don’t need to be as large as they are – or structured the way they are.”