Important Tax Tips for Married Same Sex Couples

If you and your partner were married in 2013 or previously, the much publicized Supreme Court decision of last year has a big impact on how to file your income tax return. First and foremost, the 5-4 decision is a big step toward equality, but it doesn’t outright allow gay couples to marry unfettered. The ruling, which found the Defense of Marriage Act to be in-part unconstitutional, does pave the way for some changes. However, not all change is good.

The Internal Revenue Service must recognize legally married couples, no matter whom they might be as having the same tax stance, so-to-speak. What’s troubling is the ruling can actually do a bit more financial harm when it comes time to fill out those 1040 Forms. There are two big potential wallet killers which can transpire. Here’s the deal…

Real Tax Tips for Married Same Sex Couples

Of course, when the IRS gets involved, not much good will come from said involvement. If you and your partner are legally married in the state in which you reside and that state recognizes same sex couple marriage, then you are free to file your returns as “married” and jointly; and, this is probably the best option for the majority of married gay couples.

“The Supreme Court’s ruling is clearly a victory for equality. And from a tax perspective, the decision stands to save meaningful dollars for same-sex couples who will now be defined as married for purposes of the federal estate and gift laws; because the marital deduction will now apply to these couples, spouses will be permitted to transfer assets to each other tax-free during their lifetime or at death.” —Forbes

Filing jointly, however, in the vast percentage of cases, will be the only way to really leverage any tax benefits. The sticking point is that married gay couples cannot file as unmarried this year and into the future, as that clock started ticking after the decision was reached in 2013. Domestic partnership couples and civil union same sex couples are not entitled to file as jointly married.

Murphy’s Law in Motion

The ruling has unintended consequences, though. Thanks to the decision, the IRS will now qualify two income households as joint earners, meaning, of course, that you and your partner might be pushed into a higher tax bracket. If you’re joint and/or individual income doesn’t exceed $75,000, you can qualify for a child tax credit, if you and your spouse have a child. In addition, you or your partner, depending on the situation, can claim your child as a dependent.

Another bit of important news is that married same sex couples tend to disproportionately be pushed into the marriage tax penalty, especially if each partner earns roughly the same amount. On a more cheerful note, this paves the way for married same sex couples to amend previous returns, generally for the last three filings. What’s more, married gay couples will now be able to “shield” their employment health benefits from being deemed as some kind of income.

The bottom line is, don’t go it this year alone, consult a tax professional before you file and be sure to ask about the last three tax returns you’ve filed.