Quelling Tax Filing Fears of Same-Sex Married Couples
By Alexandra Temblador
In 2014 we saw some major steps toward marriage equality in the United States. Although the celebrations have not ended and many are still fighting for marriage equality in the remaining states of the U.S., the couples that were married last year will find that things will be different for them in 2015. They begin a full year of marriage together. They might be starting a family together. Perhaps they bought a house. However, one thing is for certain in the next few months for these newlyweds: a whole new world of taxes.
Taxes are the reality of every American in the United States and now that we are effectively moving into tax season, couples that married in 2014 in states that recognized same-sex marriages might have a lot of questions about how to file their taxes this year. Below, newlyweds can find some tax information to consider when filing their taxes in the coming months:
The IRS federally recognizes same-sex marriages for tax purposes regardless of the individual’s state of residence’s marriage equality status.
When it comes to doing federal taxes same-sex married couples are federally recognized as married and have the option to file jointly or separately. It does not matter what state you currently live in to be federally recognized. Additionally, the IRS recognizes all federal tax provisions for same-sex married couples which include: claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA and claiming the earned income tax credit or child tax credit.
Same-sex married couples can file claims for a variety of refunds for previous tax years from the federal government.
Do you believe that you would have had a higher return in the previous years if you and your spouse had been allowed to marry and file jointly? Well, the IRS is allowing you to file original or amended returns for the last “three years from the date the return was filed or two years from the date the tax was paid, whichever is later.” Form 1040X is the form to use when filing for an income tax refund while Form 843 should be used for filing a refund claim for gift or estate taxes.
Now what if your employer covered your same-sex partner on your health care coverage and included the value of that coverage in your gross income or you paid premiums on health coverage with a cafeteria plan that covered your same-sex partner? You can file a claim for a refund! At least for all the years for which the period of limitations for filing a refund is open. And not only that but you can also file a claim for a refund for previous Social Security and Medicaid taxes on benefits. Be sure to research this on the IRS website or discuss it with your CPA.
If you file separately on your federal income taxes only one parent can claim the dependency deduction for a child on their tax form.
If you choose to file your federal income taxes separately, only one of you should claim the dependency deduction for your child. If you both try to claim the deduction, the IRS will award the dependency deduction to the person whom the child lives with the most during the year and if you live together it will go to the person with the higher income.
On another note, if you adopted your same-sex spouse’s child you cannot claim the adoption credit for the expenses related to the adoption.
The status of marriage equality in the state that you currently live in will determine how you file your state income taxes.
If you live in a state that allows same-sex marriage, you will file state income taxes as married. Just like federal taxes, you may be able to file a claim for refund from your state of residence for previous years’ income taxes.
What if you live in one of the nine states like Alaska that does not have income taxes? Or maybe you live in a state, like New Hampshire, that does not provide a separate rate structure for single or married taxpayers. What then? If you live in one of these states you don’t have to worry about issues that arise from treating same-sex couples as married regardless of the state’s marriage equality status.
If you live in states from the two previous categories, doing your taxes will be less complicated than for those same-sex married couples who live in states that don’t recognize or allow same-sex marriages. Unfortunately, they will have to file as if they were single.
The best way to understand your state’s income tax laws is to research their guidelines through their state websites. Kiplinger provides an in-depth explanation of each state’s guidelines and also provides a U.S. map with information on income tax filing for each state (keep in mind that the map’s page says it was last updated in February 2014, so your state’s website might be more up-to-date).
Although filing for taxes may seem overwhelming for some, it is a new step in many same-sex married couples’ lives this year. It may seem daunting but with proper research and a great CPA who understands the current tax laws of your state, you will make it through tax season. Be sure to capitalize on your ability to file claims for refunds and do thorough research so that next year you will be the expert, guiding your newly-wedded same-sex married friends on the right tax-filing-season path.
Photo Credit: Flickr member Simon Cummingham
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