American Foundation for Equal Rights

Marriage News Blog

Reuters: Newly Married Gay Couples Face Tax Landmines

The so-called “Defense of Marriage Act” created a legal quagmire for a distinct class of citizens. Because of it, legally married gay and lesbian Americans are treated unequally, causing unfair harm on them and their families.

Reuters delves into one tangible burden: the complexity and disadvantages of filing taxes:

Because of DOMA, you can’t file your federal income tax returns jointly, even if you are married by state standards. If you or your partner can file as head of household instead of as single, you’ll be able to get a greater standard deduction – $8,700 in 2012, vs. $5,950 for single – and better tax rates.

The same disparity occurs when parents are claiming dependents. A married heterosexual couple simply lists children on the joint return, and accrues tax benefits. However, for gay and lesbian couples with children, there are two problems: They can’t file a joint tax return, and they may not both be legal parents of their children. (Some states allow same-sex adoptions.)

Same-sex couples can expect higher health-related taxes, too. Generally, health insurance benefits are not taxable and employers deduct the cost of health insurance from your paycheck on a pre-tax basis. But for gay and lesbian couples the benefits for the partner are taxed at the federal level as wage income.

The problem is pervasive and increasingly widespread:

There are more than 130,000 married gay and lesbian couples in the United States, according to U. S. Census Bureau data. And with more states, notably New York, legalizing same-sex marriage, that number is rising.

In addition to the importance of filing status, gay and lesbian couples currently need to take extra measures when estate planning.

Gay and lesbian couples need to make sure they have explicit estate plans and update their wills often. That’s because the same assumptions about assets going to the surviving spouse don’t hold – and families who didn’t accept the relationship may be more likely to squabble.

For those with greater wealth who may owe the estate tax (currently due on estates above $5.1 million), the big issue is that the rules letting spouses inherit unlimited amounts tax-free does not apply to gay and lesbian marriages because of DOMA.

The good news? As the article points out, there are several cases challenging DOMA that could soon be in front of the Supreme Court.

Image via Flickr Creative Commons by Donnay

Topics: Blog, DOMA, Evidence