The IRS recently issued a series of tax revisions that directly impact same sex couples. Some of them are related to the filing of income tax returns and deductions that are now legal. This 60 second tip from Robert Keebler, CPA,may give you some information you may need.
Listen now. It may save you some money.
For more information about the new laws or estate planning, go to diesmart.com.
If you live in a state that recognizes gay marriage, you are entitled to federal tax breaks that other married couples get. However, if you have business income from a state that doesn’t recognize same sex marriage, you’ve got a problem.
This week, Reuters published an article about a married California couple, Jeremy and Randy. They don’t know how to report the business income Randy gets from Florida – a state that doesn’t recognize gay marriage.
The chief of the IRS, Danny Werfel, was quoted as saying that the IRS hopes to publish rules that will address issues like this one as soon as possible. But there are more than 200 tax code references to marriage that have to be evaluated before this can happen.
Do you think the couple should get tax breaks based on income earned in a state that doesn’t recognize gay marriage? Let us know what you think.
For information about other financial matters like estate planning, go to our website, diesmart.com.
Although DOMA has been overturned by the U.S. Supreme Court, there is a major issue related to the divorce of same sex couples.
This issue is exemplified by the plight of Adam Cardinal, a gay man. More than four years ago, Mr. Cardinal married his love, who happened to be of the same sex. They were married in New Hampshire where same sex marriages are legal.
The couple subsequently moved to Florida, where their marriage is not considered legal and it is in Florida where the problem arose.
Several months ago, they separated and wanted a divorce. However, since their marriage was not recognized in Florida, they could not obtain a divorce there.
The other option, returning to New Hampshire where they were married, was not feasible. Although you just need a short visit to marry in New Hampshire, that state requires at least a one year residency before it will grant a divorce. Since the former couple did not have the flexibility to pick up their lives and move back to New Hampshire, they are stuck.
They cannot divorce or remarry. They are in limbo. If one of them dies in a state where same sex marriage is legal, and he does not have a will, their still legal spouse may inherit everything. Even though Mr. Cardinal and his spouse did not merge their funds, the lack of legal paperwork signifying the end of their marriage may cause financial issues in the future.
Six of the states that recognize same sex marriage, including Delaware and Vermont, allow nonresident couples who married in the state to divorce under some circumstances, but those circumstances are not clear cut.
DOMA was just recently overturned and a lot of details about the related wide ranging issues remain to be addressed. States have a lot of work ahead of them as they figure out how to handle all of the specific issues related to same sex marriage and divorce.
To learn more about estate planning and other issues related to end of life issues, go to www.diesmart.com.
One of the many changes that that will affect gay and lesbian married couples is in the area of income taxes.
A February report by the Williams Institute, a UCLA law school think tank that studies sexual orientation and gender identity law, found that “most married lesbian, gay, bisexual and transgender workers pay more in income taxes than they would if allowed to file as ‘married, filing jointly’, especially for spouses with very different incomes. For example, a working parent with taxable income of $60,000 a year and a stay-at-home spouse with no income would pay $2,900 more as individuals than as a couple. ”
The report goes on to say that “until now, working LGBT parents couldn’t establish legal ties to their spouses’ children, so generally were not able to claim child-related exemptions, deductions and credits.” In this new post DOMA world, they will probably be able to establish legal ties and claim the tax benefits.
Another area in which they may benefit is that of Social Security. When the first spouse dies, the surviving spouse most likely will be able to collect the deceased spouse’s Social Security if the amount is higher than theirs.
As mentioned in an earlier blog, estate tax is a third area in which these couples should see a major benefit. In the past, when one person died, the other partner had to pay taxes on any inherited assets. Now, as a legally married couple, when one spouse dies, all their assets could go to the surviving spouse without any tax penalty being imposed .
Finally, legally married gay couples should review any tax returns they filed since their weddings. They may be eligible to amend their returns to file jointly and take other deductions that were not previously available to them.
There are more than 1,000 federal statutes related to benefits that, until now, were only available to married couples consisting of a man and a woman. They will now be available to same sex married couples as well.
For more information about estate planning and other issues related to getting your affairs in order, go to http://www.diesmart.com.
The Supreme Court today made a decision to strike down DOMA (Defense of Marriage Act); this will dramatically expand the access of married gay couples to many federal benefits related to tax, health and pension that have been denied to them until now. This decision affects same sex couples in the 12 states and the District of Columbia which allow gay marriage; these couples represent about 18% of the U.S. population. With the addition of California, the percentage will shoot up to 30%.be even higher.
DOMA was signed into law by President Bill Clinton in 1996, and prevented the government from granting marriage benefits in more than 1,000 federal statutes to same-sex married couples in the states that allowed gay marriage.
One very important benefit of today’s Supreme Court decision is related to estate taxes. Until now, same sex married couples could not benefit from married couple estate tax laws. Now they will have the same benefits as all other married couples.
According to Yahoo News, ” Eighty-three-year-old New Yorker Edith Windsor brought the DOMA suit after she was made to pay more than $363,000 in estate taxes when her same-sex spouse died. If the federal government had recognized her marriage of more than four decades, Windsor would not have owed the sum. ”
With the Supreme Court’s decision to strike down DOMA with a 5-4 vote, Windsor will finally be eligible for a tax refund, plus interest.
For more information about estate taxes and settling an estate, go to www.diesmart.com.