Domestic Partnership vs. Marriage: What's the Financial Difference?

It's more than just taxes

A male couple with their toddler

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You might think that marriage is the best choice when it comes to your finances, but getting married isn’t always the answer for every couple. Roughly half of the U.S. adult population is unmarried.

A domestic partnership has its own financial benefits. The differences between a marriage and a domestic partnership are many, and each has its own advantages. Which is right for you depends on your preferences and circumstances.

What's the Difference Between a Domestic Partnership and Marriage?

 Domestic Partnership  Marriage
Sharing retirement benefits can be complicated. Spousal retirement benefits are easier to access.
You may not have access to your partner's health insurance. You'll have access to spousal health insurance.
There are no special asset transfers. You have unlimited asset transfers in most states.
You'll avoid the "marriage tax" penalty. You'll get a larger standard tax deduction and gift tax exemption.
You may not have survivor benefits. You'll have clear spousal death benefits.
There's no financial protection in separation. Divorce provides financial protection.
Isn't recognized in all states. Is recognized in all states.

There are some significant differences when it comes to the financial implications for domestic partnerships and marriages.

Sharing Health and Retirement Benefits

Married partners have access to spousal IRAs, and they can roll over a spouse’s IRA into their own upon their partner's death. They also have more options than domestic partners for taking spousal Social Security benefits. You'll also likely qualify for coverage under your spouse's health insurance plan if you're married. This is a pretty standard benefit for married couples.

Sharing retirement benefits can be a bit more complicated for domestic partners, and you may end up paying higher taxes. You might also experience a lack of coverage through your partner’s employer-sponsored health insurance. Your partner's health insurance can also be treated as a taxable benefit if you do get coverage.


Only 34% of companies that offer health benefits to spouses also offer them to opposite-sex domestic partners. That increases to 43% for same-sex domestic partners. This is an important factor to consider because buying your own health insurance can be expensive.

Tax Benefits

Tax season may sweeten the marriage deal because couples enjoy several tax benefits when they tie the knot. Your standard deduction is double what it was as an individual. You're also eligible for a larger home sale exclusion as a married couple.

Married couples can transfer an unlimited amount of assets to one another free from gift or estate taxes. And your gift tax exemption is doubled to $30,000 instead of $15,000 as of 2021, or $32,000 instead of $16,000 as of 2022, if you plan to give money or property to your family or anyone else in the future.

But domestic partners avoid the "marriage tax" penalty. Married couples who earn roughly the same generally get penalized during tax time because they tend to move up to a higher tax bracket more quickly. It's the opposite of the "marriage bonus," in which one spouse earns significantly less than the other. This delays the tax bracket jump.

Survivor Benefits

You're much better off if you’re married and your spouse passes away without a will. All states recognize a married partner's right to inherit at least a portion of their deceased spouse's assets. Domestic partners may not be eligible for death, pension, or survivor benefits if one partner passes away, depending on the state.

Asset Protection

You'll also be better protected financially in the event of a divorce if you're legally married. You'll be entitled to the division of marital assets, as well as potential spousal support. Domestic partners who separate may share these same rights in some states, but the exact laws can vary significantly.

State Recognition

Perhaps the biggest drawback of a domestic partnership is that rights vary so greatly by state. Some—such as California, Hawaii, Maine, Nevada, New Jersey, Oregon, Washington state, the District of Columbia, and Wisconsin—recognize domestic partnerships. Others do not.

The rules can also vary by city. Lack of domestic partnership rights can often have a big effect on your finances depending on where you live, so this is an important point to consider.


Domestic partnerships were originally formed to provide legal benefits to same-sex couples. They now apply to couples who live together, or couples who are age 62 or older and cohabitate, in many states as well. Domestic partnerships can apply to both same-sex and heterosexual relationships.

Which Is Right for You?

Choosing between domestic partnership and marriage is a personal decision, and it will largely come down to your own values and the laws in the state where you live. Securing all possible financial benefits of a domestic partnership takes a bit more legwork and planning than marriage, so be sure you're discussing everything with a lawyer who knows your state and local laws before you choose that route.

The Bottom Line

Being on the same page with your partner about money is an important aspect of managing your finances regardless of whether you’re in a marriage or a domestic partnership. You may have to change your mindset about money when you get married or decide to become partners.

Life partnership is certainly about more than money, so these decisions should factor in the many different aspects of merging your lives together. Just be sure that money is a part of your planning as you decide whether to get married or become domestic partners.

Frequently Asked Questions (FAQs)

What's a "common law" marriage?

A common law marriage is legally recognized as a marriage even though the spouses never obtained a marriage license or took marriage vows. They've simply lived as married persons. Only eight states recognize these marriages by statute, but they're treated the same as other marriages, and they are comparable to domestic partnerships in all respects.

How do I annul a domestic partnership that became a marriage?

Dissolving a marriage that was a domestic partnership before you tied the knot is subject to the same rules as ending any other marriage, so some spouses can annul the marriage rather than divorce. The rules for qualifying for an annulment are strict, and it can be difficult to get one. An annulment is effectively a legal statement that the marriage never happened.

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  1. United States Census Bureau. "Census Bureau Releases New Estimates on America’s Families and Living Arrangements."

  2. Kaiser Family Foundation. "2019 Employer Health Benefits Survey."

  3. Internal Revenue Service. "IRS Provides Tax Inflation Adjustments for Tax Year 2021."

  4. Internal Revenue Service. "Publication 523 (2020), Selling Your Home."

  5. Internal Revenue Service. "Divorced or Separated Individuals," Page 19.

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  7. Merrill. "My Spouse Died With No Will. What Does This Mean?"

  8. National Conference of States Legislatures. "Civil Unions and Domestic Partnership Statutes."

  9. National Conference of State Legislatures. "Common Law Marriage by State."

  10. "How to Get an Annulment."

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