Getting married: Why it makes financial sense for Irish couples to say 'I do'
Everyone loves a wedding, even the Revenue Commissioners, says Sinead Ryan
Wedding fever is in the air with Prince Harry and Meghan Markle tying the knot on Saturday. While all eyes will be on the dress and the royals, the happy couple probably won't be giving too much thought to the tax break they'll enjoy from getting hitched.
Everyone loves a wedding, even the Revenue Commissioners, and it may surprise you to know, if you're waiting on the question to be popped, that it makes financial sense to say "I do". This week I'm looking at the less romantic, but no less important, aspects of marriage.
Married couples are treated more favourably by Revenue when they have an earnings gap as they can share tax credits, says Barry Flanagan of Taxback.com. Where a couple has only one income or one spouse earns less than the standard rate cut-off point of €34,550 and the other more, the tax saving is up to €3,450 a year compared to a single person.
Home carer tax credit
This tax credit is given specifically to married couples or civil partners 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 €1,200 per year if the stay-at-home earns less than €7,200 pa. It isn't given to cohabiting couples in the same circumstances as they are not jointly assessed for tax purposes.
When someone who is married dies, irrespective of a will or the deceased person's wishes, the Succession Act 1965 gives their spouse a 'legal right share' to one third of their estate. This is not the case with cohabiting couples who have no automatic right to share in their partner's estate and would need to be named specifically in a will to inherit, and indeed, may be subject to tax on their bequest.
Capital acquisitions tax
Inheritances can be bequeathed tax-free between spouses to an unlimited extent. This means that for most married couples making a simple will, they can confidently ensure that their house, assets and money can be left to their husband or wife without Revenue getting involved. However, for a cohabiting couple, they are only allowed leave €16,250 tax free to the other person; anything above that is charged at a whopping 33pc as they are Class C, or 'strangers' in the eye of the law.
Capital gains tax
Gains made on profits (say from selling a house or art), are normally taxed at 33pc. However, if you are married you can transfer gains between spouses and even offset the losses of one against the profits of the other. This allows wealth management in a way that cohabiting couples or friends cannot share.
Even though couples who aren't married can take out life insurance on each other, for instance to pay off a mortgage, it can still leave the remaining partner with a huge tax bill on pay-out, says Eoin McGee of Prosperous Financial Planning. "Once you're married there is no tax paid if your spouse leaves you anything." Because you can take out one policy in 'joint names' on marriage, you save on the policy fees t and insurers tend to price lower on couples policies than single ones.
Every €100,000 saved in a pension fund produces a pension of around €4,000 pa for a single person, but add in a 'spouse' pension option, which continues to pay €2,000 for a husband/wife after the other dies, and the cost is just €361 pa, according to actuary Tony Gilhawley of Technical Guidance Ltd.
It's a bit of insurance that only a spouse can get, for the rest of her or his life, as it can't be transferred to anyone else.