Joint Tax Filing For Married Same-Sex Couples

Rights and Responsibilities for Married Gay Partners

Joint Tax Filing For Married Same-Sex Couples
February 20, 2017

On June 26, 2015, the Supreme Court settled the issue of same-sex marriage in the U.S. with the landmark decision in Obergefell v. Hodges. This decision requires states to issue marriage licenses to same-sex couples and for states to recognize such marriages that were performed in other states. Gay marriage became legal in all 50 states.

The governmental recognition of same-sex marriage means that same-sex couples can now enjoy the same rights and privileges that opposite-sex couples do — and the same responsibilities and potential pitfalls of marriage. Taxes are a prime example. Married same-sex couples must now consider the best tax filing status now that they have the options of "married filing jointly" and "married filing separately". As with opposite-sex couples, the answer is not always straightforward.

When spouses have a large disparity in their incomes, they can benefit from the "marriage bonus" of filing jointly. That has the effect of averaging out the incomes, lowering the tax burden on the higher-earning spouse a lot while raising the taxes on the lower-earning spouse slightly. The couple's overall tax bill is then lowered as a result.

When spouses earn approximately the same amount of money, the effect depends on the amount of their collective income. Couples with more modest matching incomes are likely to pay about the same amount of tax as before, while higher-earning couples could run into the "marriage penalty" of ending up in such a high tax bracket that they would have been better off filing as singles.

Same-sex couples with higher incomes are more likely to itemize, and also have income levels where certain itemized tax deductions like mortgage interest, charitable contributions, and property taxes begin to phase out or disappear completely. On the other end of the income scale, combining incomes could make a couple ineligible for some tax credits and other low-income benefits. Unfortunately, the only good way to determine this is to calculate taxes both ways (joint and separate status).

Same-sex couples in some states that did not recognize gay marriage prior to the ruling already have practice doing multiple returns. State taxes were not as straightforward prior to the ruling, because some states that did not recognize same-sex marriage required couples to file under single status even though their federal status was married filing jointly. The state definition of income in these states was tied to the federal definition, forcing the preparation of an extra "dummy" federal tax return for each partner just to define income for state tax purposes.

Same-sex married couples must also take the time to adjust all financial planning vehicles such as retirement plans, wills, and estate plans to denote the proper marriage and beneficiary status. Money or property transfers to a spouse are generally exempt from federal taxes, so failure to update your status correctly could be costly.

From now on, same-sex married couples have the same tax decisions to make that opposite-sex couples do. The Supreme Court decision provided clarity to their taxes. Take note, because the words "taxes" and "clarity" rarely appear in the same sentence.

Calculate your tax bracket.

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Carla Truett | 03.11.16 @ 15:16
I have a couple friends who have used this already. I'm happy for them that times have changed.
Erin | 03.11.16 @ 15:18
It's past time that same-sex couples get the same benefits as hetero couples. It's good to see that marriage no longer has to be defined by the sex of the people in it and we can all file the same way..
trish | 03.11.16 @ 15:18
Wonderful news that we are finally moving in this direction. Can't wait until they get the same rights as any other married couple.
Alec | 03.11.16 @ 15:19
I'm happy to see that all married couples are able to file the same way finally without having to jump through hoops based on the state they live in.
Christina | 03.11.16 @ 15:19
It's good to know that same-sex couples now have the same options to choose the best filing status as well!
Vaughn | 03.11.16 @ 15:22
I think its great that everyone can benefit from the same rules now. The rules shouldn't be different because of who you love.
promostuffmail | 02.22.17 @ 14:11
There is one hurdle or problem that this article does not address. My husband and I lived in CA, where we were married in 2008, and moved to GA in 2010, where the state refused to issue me a DL with my legal last name, the surname of my husband that I took in 2008 when we married. Additionally, we were forced to file separate tax returns in GA as single, unable to take advantage of the joint return status and itemization for GA State Taxes. The ( U.S. Government) Federal Taxes allowed us to file jointly but not the state of GA. According to Article IV, Section 1 of the U.S. Constitution, "Full faith and credit shall be given in each state to the public acts, records, and judicial proceedings of every other state. " So, we have a problem. The issue is not really with the Federal Government, the various states that passed or have laws barring/ banning same-sex couples from marrying or defining marriage as strictly heterosexual (man and woman) is really where the tax issues need to be addressed.
$commenter.renderDisplayableName() | 11.21.17 @ 04:40

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