Gay marriage: a tax guide for newly-wedded couples
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With 36 states now recognizing same-sex marriage, many newly wedded gay and lesbian couples will be filing joint tax returns for the first time this year. For some, it could mean being bumped to a higher tax bracket or getting a bigger refund. For those who live or work in states that don鈥檛 recognize gay marriage, it could mean filling out multiple returns.
鈥淭here鈥檚 a lot of good reasons for getting married. Taxes aren鈥檛 one of them,鈥 says Tina Salandra, a certified public accountant and principal at Numerical, a New York firm that specializes in tax counseling for same-sex couples. She notes that same-sex couples are often surprised by the extra costs of filing as married.
Don鈥檛 get caught off guard this tax season by higher tax rates or benefits you didn鈥檛 know were available to you. The sooner you know what to expect, the quicker you can get help from a tax expert if you need it as well as get your deductions and credits.
Here鈥檚 a look at what this year鈥檚 tax season might mean for you and your spouse:
A lot depends on where you live
No matter what state you鈥檙e living in, for the federal level you鈥檒l have to file as married either separately or jointly. You鈥檒l also have to file as married at the state level if you live in a state that recognizes gay marriage (with the exception of听). But if the state you live or work in does not recognize same-sex marriage, you鈥檒l likely have to file as single on your return for that state (with the exception of听). Check your state鈥檚 taxation website for more guidance on how to file in these situations.
You may owe more in taxes
Since married gay and lesbian couples earn more on average than their straight peers, according to a听, they鈥檙e more likely to be bumped into a higher tax bracket when filing as married, whether it鈥檚 a separate or joint return. This is called the marriage penalty 鈥 and for higher-earning couples, it鈥檚 often unavoidable.
鈥淪traight people have been plagued with this for years, whether they realized it or not,鈥 says Salandra, noting that many end up paying thousands more in taxes as a result.
If you find out that you鈥檒l owe more in taxes this year because of your married status, fill out a W-4 with your employer to adjust your future withholding and prepare for the next tax season.
You may save on taxes
Filing as married doesn鈥檛 always come at a higher cost. If you and your spouse are lower earners, or if one of you is a stay-at-home parent and the other works, you鈥檒l likely get a bigger refund than you would if you were filing as single. As a married couple, you can also transfer property and money to each other without triggering the gift tax or estate tax, and this could save you a lot in the long run.
Amending past returns may save you money
If you got married before the Internal Revenue Service announced in 2013 that it would start recognizing all same-sex marriages for federal tax purposes, you can still听. Fill out a Form 843 to get a refund on gift taxes and estate taxes and a Form 1040X to amend income tax returns.
鈥淭axpayers are under no obligation to file amended returns, but a review is worthwhile to see if a different filing status might result in a refund of taxes paid,鈥 says Portia Rose, a CPA at Marcum LLP, a top national accounting and advisory firm that offers specialized tax services for LGBT couples and other nontraditional families.
If you鈥檙e unsure whether amending would save you money, ask a credentialed tax expert to help you weigh factors such as tax refunds on a partner鈥檚 health care, child tax credits and gift taxes. You can also do a free estimate of your amended return on the do-it-yourself tax site听.
For now, paying taxes for same-sex couples can be a headache, but Rose says things are quickly changing.
鈥淚 look forward to the time when every state in the union will recognize same-sex marriages and make our lives easier,鈥 she says.
Where to find help
Here are a few organizations that offer free assistance to same-sex spouses trying to figure out taxes this year:
听鈥听Search a database of tax professionals who can help you file returns in your state.
听鈥听The DIY tax website provides a free estimate of how much you could save with an amended return.
听鈥听Search here for free tax counseling if you earn $53,000 or less a year.
听鈥听Senior citizens filing returns can search for one-on-one support here.
Infographic听by Sydney Buffman.