Same-Sex Marriage and Taxes
By Mike Simon
Who Can File Jointly
Congratulations! The U.S. Government finally recognizes your marriage! Unfortunately, this doesn’t mean all same-sex couples will be able to file joint tax returns in the immediate future. If you live in a state where same-sex marriage isn’t recognized, you’ll still have to file your taxes on separate, Single returns, just like you have in the past. However, if you do live in a state like Minnesota, where same-sex marriage is recognized, you now have access to all of the benefits available to any other married couple on a jointly filed tax return. What does this mean for couples who marry in a state that allows same-sex marriage and then move to a state that doesn’t? We don’t know yet and we’re still waiting on the IRS to provide direction.
Don’t worry. Getting married won’t drastically change the information you’ll need to file your taxes, it’ll only cause some minor changes in the way you file the return. You’ll still need all of the income and deduction information you’ve always used, but now, particularly if you’ve been splitting expenses with your spouse on single returns, you’ll be able to include all of your spouse’s information with yours and you’ll both be eligible for the tax savings and credits allowed by the facts and circumstances of the return.
As far as tax savings from filing joint tax returns, we’re seeing some general trends, in that two high income earners ($100,000+) are producing a slightly higher tax when their returns are combined, while two earners making roughly $60,000 each should come close to breaking even. Where we’re seeing the most savings are in cases where there’s a large discrepancy between the incomes of both spouses. In this case, the lower income earner helps to bring the higher income down to a lower tax bracket. Again, these are general trends and the facts and circumstances of your situation may create a very different result. If you have any questions on your situation and how filing jointly will affect you, you should seek the advice of your tax advisor.
Filing Your Return
We do know that married same-sex couples will be able to jointly file their tax returns for 2013. Beyond that, there are still a lot of questions that the IRS needs to answer on a couple issues. The first is whether couples who were married before DOMA was struck down earlier this year will be able to amend prior return where they weren’t allowed to file jointly. The second is what needs to happen with 2012 returns that received automatic 6-month extensions and haven’t been filed yet and could conceivably be filed jointly now. We’re hoping to hear more on these relatively soon, since the extension filing season is coming up in October.
Areas of Immediate Impact
There are two areas of taxation where the impact of DOMA being struck down is having a more immediate effect. The first is Federal Gift and Estate Tax. Legally married couples are exempt from nearly all taxes due to property or money transactions between the spouses. This means that a number of transactions and gifts that were once taxable because marriage wasn’t an option can now take place within the marriage and escape taxation. The second area is Employment Benefits. Up until this summer, benefits obtained for a same-sex partner were subject to income tax, while benefits obtained for a spouse are exempt from tax. Now, that extra amount in Health Insurance Premiums you pay for your spouse will no longer be taxed. The tax remains, however, for those who remain unmarried.
These are just some of the basics. As you can see, there are still a number of questions that need to be answered before all of the issues surrounding same-sex marriage and taxation are cleared up. Especially when it comes to who can file based on what state they live in. In additions, there are a number of other issues that affect your tax planning picture and need to be taken into consideration when filing your tax return. If you have any questions about how getting married will affect your tax filing, please contact your tax professional so they can help you interpret your new tax picture.
Mike Simon is an Income Tax Specialist at ROR Tax Professionals, LLC. ROR Tax specializes in income tax planning and preparation for individuals and businesses. Find more information at www.RORTax.com.