The wedding industry is booming, and couples are spending more and more on the big day. In 2023, the average cost of a wedding hovers around $30,000. You’d think that the spending induced by weddings could single-handedly pull our country out of its economic troubles (then love really could conquer all).
But weddings aren’t just good revenue-makers for vendors. They also have more tax implications than people realize. Here are four instances where taxes may affect your wedding—for better or for worse.
With prizes ranging from a free tuxedo rental, to free photographer services, to even an entirely free wedding, brides near and far know that wedding giveaways are abundant and will do just about anything to get something free or discounted for their expensive day.
But are these prizes really free?
Not if Uncle Sam has anything to say about it: Any time you win a prize, you have to pay taxes on that prize. The IRS considers any prize to be “other income” for you and requires that you report it on your tax return (you’ll likely receive a 1099 form for large prizes).
Winners won’t have to worry much if their prizes are small. However, those with prizes worth $10,000, $50,000, or even $100,000 may need to re-consider the amount of taxes they’ll have to pay on the said prize before claiming their winnings. Taxes on a $100,000 prize could be more than you planned to spend on a wedding in the first place! So there really is no such thing as free.
Sales Tax: The Wedding Budget Buster
When you’re making the first draft of your wedding budget, it’ll probably include all the must-have items like a cake, attire, reception hall rental fees, disc jockey fees, catering costs, costs of the bar, and flowers. These are standard fares at many events.
Guess what? Most of the items in your wedding budget are subject to sales tax (with some exceptions such as services or building rentals).
Sales tax on a $6,000 caterer bill could easily reach or exceed $500. If you start spreading a sales tax percentage across your entire wedding budget, your total tax bill could reach a couple of thousand dollars or more. Taxes can end up being a significant amount, so don’t forget to include them in your wedding budget.
Consider Charitable Contributions
If you’re having your ceremony at a religious site, it might be worth investigating whether your ceremony fees could qualify for charitable contributions.
Alternatively, if you are a member of the church where you will get married, talk with the church administrator to see if there is a donation minimum for members so that you won’t have to pay a ceremony fee. If you just have to increase your donations by a couple hundred dollars in order to avoid the ceremony fee, it might be worth it considering you’ll be able to use your contributions as a tax write-off and give to a good cause all in one fell swoop.
Are you using the hall or banquet room at your church for your reception? The rental fee could be a write-off. Likewise, if your church needs to purchase additional equipment (tables, chairs, etc.) to host your event, consider purchasing the equipment for them as a donation and using the expense as a tax write-off.
Will Mom and Dad Be Taxed?
Age-old tradition says that the bride’s parents pay for the wedding and reception and the groom’s parents pay for the rehearsal dinner. In this day and age, these traditions might not have a place in your wedding events, but many parents still fork over quite a bit of money to help pay for some of the wedding, if not all of it.
So, will your generous parents be taxed on their gift? Is the money even considered a gift?
It really depends on whether they give you the money straight-up to pay for the wedding or if they pay for the wedding out of their own pockets. Here’s a general guideline for each.
- If you parents pay for the wedding right out of their pockets, this may not be considered a gift because it could be argued that they are not giving you the money directly.
- If your parents write a check to you for a lump sum to pay for the wedding, this is most definitely a gift and will be subject to gift tax.
Luckily, the thresholds for gift taxes are fairly high, so depending on how much they contribute, they might be able to get away without paying taxes. Since they can split the gift between themselves as givers as well as split the gift between you and your future spouse as receivers, they can give a pretty significant amount before they’ll be hit with the gift tax.
In 2023, the annual exclusion per taxpayer for gifts is $17,000 (up from $16,000 in 2022). This means that if you’re getting help from two parents — or grandparents, or relatives, or just really good friends — they could split the costs between them and exclude up to $34,000 in costs. If they’re fully covering the wedding and your celebration ends up costing more than this, they’ll only pay taxes on the amount that exceeds the exclusion limit.
So depending on the kind of wedding you’re having and how much help you’re getting, your gifters may or may not have to pay taxes.
The Bottom Line: Don’t Forget Uncle Sam
When you’re planning for your wedding, it’s important to be conscientious of how taxes might impact your decisions. Don’t let the tax-side of weddings ruin your big day, just be wary of it in the planning stages.
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