Rowling & Associates Blog

Financial Planning for LGBTQ Couples

by Steve Doster

With the Supreme Court ruling in 2015 that every state must allow same-sex marriage, all LGBTQ couples can now ask, “Should we get married?” Before answering yes, there are many financial planning pros and cons to discuss between the two of you and your financial advisors.

Before you consider the financial planning aspect, your primary consideration should be whether or not you want to get married!

Many same-sex couples have been together long before marriage equality existed. Some of these couples don’t view marriage as important or necessary when it comes to showing their love and commitment to each other. However, they’ll consider marriage if it’s a smart financial move.

Like all things in life, the “right” decision is based on many factors including your personal goals and beliefs. With this mindset, let’s look at a few financial planning topics to think about if you and your partner are considering marriage.


Many couples may have heard the term “marriage penalty.” It comes from the way our tax brackets and deductions are set up. Prior to 2018, two single people could file separately and pay less tax than if they were married. Without getting into details, the 2018 tax law greatly reduced the marriage penalty. Couples need to earn more than $625,000 in combined adjusted gross income (AGI) before they get hit with any significant marriage penalty.

The one area married couples lose out on is the State and Local Tax (SALT) deduction. This only impacts married couples who itemize deductions, which are very few. These married couples can only itemize $10,000 of state income tax and real estate property tax combined. Two single people can each take the $10,000 deduction – assuming both would itemize deductions individually.

Mortgage Interest

Similar to the SALT deduction, marriage could limit mortgage interest deductions. Under current laws, mortgage interest can only be deducted on up to $750,000 in principle – or $1 million for “grandfathered” loans. This limit is doubled if a couple is not married.


One big benefit of a partnership (whether you are married or not) is financial stability. You become one “economic unit” rather than two. Two people sharing housing costs, utilities, insurance, food, travel, and all sorts of other expenses has a huge positive impact on the financial stability of both partners.

When it comes to investing, there are also benefits for couples – whether they are married or not. Some couples choose to keep their investments separate. Each partner has their own allocation between stocks and bonds. This is perfectly fine and a personal choice. Another option is to build one cohesive portfolio taking advantage of each partner’s employer plan and different account types. Doing this can lower costs of the combined portfolio and improve tax-efficiency.

Social Security

A married person gets the higher of their own Social Security benefit or 50% of their spouse’s benefit. This can result in higher Social Security benefits if one spouse is a lower wage earner. This benefit survives even if the couple divorces so long as the marriage lasted at least 10 years and the lower wage earner does not remarry.

Death and Taxes

Marriage provides many protections when one spouse dies. Here are just a handful of important benefits for married couples:

– A surviving spouse can roll over any retirement accounts (IRA, 401(k), 403(b), TSP) into their own name. There are no required minimum distributions for the surviving spouse until they reach 70 ½ years old. This saves on taxes especially if the surviving spouse is still working. For couples who are not married, the surviving partner would receive these accounts as an “inherited IRA”. An inherited IRA has required minimum distributions over the survivor’s lifetime. And currently, Congress is about to pass legislation requiring all inherited IRAs be fully distributed within 10 years.
– California is a community property state for married couples. When one spouse dies, the entire home value receives a “step-up in basis” at the date of death. The surviving spouse can sell the home with no taxes, even if the home value has increased drastically since they bought the home together. For a non-married couple, only half of the home value would receive the “step-up in basis” and the surviving partner could pay a huge tax bill if the home is sold.
– A surviving spouse can assume the higher Social Security benefit of the two spouses when one dies. Let’s look at a quick example. Imagine Joe gets $1,000 per month in Social Security and Luis gets $2,000 per month. If Luis dies, Joe replaces his $1,000 per month with Luis’s $2,000 per month benefit. If they were unmarried, Joe would continue getting $1,000 per month after Luis passed away.
– Pension plans have survivor benefit options that allow a surviving spouse to continue receiving benefits if the pensioner passes away. Most pensions required couples to be married or in a domestic partnership in order to qualify for the survivor benefit options.

Marriage is a big decision.

Overall, the negative tax consequences of getting married have been greatly reduced. That said, it’s still a very smart idea to talk with your CPA and financial planner to see how the rules would impact you. Always keep in mind though, get married if you want to. Don’t let numbers get in the way!