Understanding tax implications on marriage

One thing that doesn’t change much when you get married, is your tax return. You still file and pay individually. Even so, there are a few things worth knowing before you tie the knot.

It has to do with the kind of marriage you choose. There are three options.

In Community of Property

Unless you say otherwise, your wedding is automatically considered in community of property. It means current and future assets are shared equally.

The law regards you as equal partners in an estate. You pay your own tax on your salary and benefits like travel allowances, but each pays half of the tax on investments and capital gains. Both of you declare the full income on your tax return and SARS takes 50% from each. Just be sure to tick the box that says you’re married in community of property, or you’ll both be taxed the full amount.

The same goes when you sell an asset like a house. The capital gain is also split for tax and both partners get the basic exemption.

The main problem with this option is when one of you die, the entire estate has to be dealt with by an executor. Fees are based on the gross value of the joint estate.

Out of Community of Property

Out of community of property requires an antenuptial agreement to make it legally binding. If it’s without accrual, you keep what you came with and also anything you gain during the marriage. You and your partner are taxed separately on all income.

The same applies to liabilities and one partner’s creditors cannot touch the other’s income.

With Accrual

With accrual has one added feature. Upon death or divorce the partner with the larger growth in assets has to pay the other half the difference in accrual. An antenuptial agreement can reduce tax risks, because you can use it to say how assets and income will be transferred or allocated.

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