Same-sex marriages often illicit mixed reactions from the public. One of the most contentious issues has been whether to treat legally married or registered domestic gay partners just like heterosexual couples in terms of federal taxation. Understanding the tax consequences of your actions is the best way to make sound tax decisions. For gay taxpayers, consider the following:
Joint Filing: Married same-sex couples or Registered Domestic Partners (RDPs) are free to file joint tax returns with their respective states if the status is recognized by the state.
Separate Filing: The acceptance of same sex marriages as legitimate marriages is gradual, and while some states have legalized them, others don’t. If you reside in a state that doesn’t recognize same-sex unions, then the best thing to do is file separate returns with the IRS. In such instances, each person should only report personal incomes and expenses. The filing status should be single and in case there are children, one of the partners can file as the Head of Household (HOH), which is determined based on whoever provides more than 50% of household expenses for every child.
Community Property States: If you reside in community property states, there are some special IRS rules you have to be familiar with, especially those that require couples to divide all income and expenditures based on the set community property laws. Despite the fact that income is split, for the self-employment couples, the SE taxes are paid by whoever actually earned the business income, or profits. This is normally complicated in situations where assets or pensions were already in existence long before the marriage.
Special Bonuses: Some families can qualify for some bonuses, especially with adoption expenses. According to the IRS, the whole amount for the available adoption credit can be claimed by each partner. However, only the credit for eligible expenses one pays can be claimed by each person. Make it a point to check with the IRS to amend your tax return and claim a huge refund if you adopted a child in the last few years.
If you really care about the welfare of your partner, you must prepare, if not a will, a living trust. This will see to it that your spouse or partner properly and legally inherits your property for state and federal tax reasons upon your death. If you have any children, clearly define who will take custody. As the law takes shape on same-sex couples, regularly check the IRS website for new legislations and how taxes will affected on both state and federal government levels.