Tax Advice for Same-Sex Married Couples Filing Joint Tax Returns

In a landmark ruling, the U.S. Supreme Court struck down the discriminatory Section 3 of the Defense of Marriage Act (DOMA) which defined marriage as legal union only between one man and one woman. Soon, the IRS followed by declaring that "same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes."

Same-sex married couples now have equal rights for federal tax purposes. The IRS looks to state law to determine whether individuals are married; so if a same-sex couple is married in a state that recognizes same-sex marriage, they are married for federal purposes. However, for state tax purposes, same-sex couples are only considered married in states that recognize same-sex marriage. This means that if a couple is married in a state that recognizes same sex marriage, but lives in a state that does not recognize same-sex marriage, they are not considered married for state tax purposes.

Sixteen U.S. states recognize same-sex marriage: Massachusetts, Connecticut, Iowa, California, New Jersey, Vermont, New Hampshire, New York, Rhode Island, Delaware, Minnesota, Hawaii, Illinois, Maine and Maryland, as well as Washington, D.C. A same-sex couple must exchange vows in these states or jurisdictions for their marriage to be considered legal.

Benefits of Filing Joint Tax Returns

Married same-sex couples can potentially reduce their tax liability by filing jointly. They may also choose to file taxes using the married filing separately status if they wish. If the couples file jointly, they receive the following benefits:

  • If one spouse does not work they can contribute to an individual retirement account (IRA).
  • If a spouse is losing money in a business or is incurring heavy medical expenses, the other spouse can use the loss as a tax write-off.
  • Married filing jointly can claim personal and dependency exemptions.
  • They can claim the earned income tax credit.
  • They can take the standard deduction.
  • Filing joint returns also help to lower taxes on taxable investments.

Filing jointly can potentially lower a couple's overall tax liability because many of the credits and deductions that are only available to those filing returns with married filing jointly status.

Disadvantages of Filing Jointly

In certain cases, married filing jointly can be disadvantageous. If a spouse has a substantial tax debt to pay, uncovered medical expenses or other dues, married filing separately may be a better option than filing jointly.

To choose whether to file jointly or separately, couples should consider their unique circumstances to decide which filing status provides them the most benefit.

When a joint return is filed, both the spouses are equally responsible for the information on the return. If there is an understatement of taxes, miscalculation or an error, intentional or unintentional, the IRS will consider both the spouses responsible. In many cases, a spouse is ignorant of the information on the return and signs it on trust only to discover later that the other spouse had understated income, leading to a tax debt. In such a case, the liability of paying the tax debt falls on both the spouses, even after a legal separation or a divorce because the return was signed and filed before the parting.

Married same-sex couples can now potentially lower their tax burden and enjoy the many tax benefits of being a legally married couple. If they are married and living together on the last day of the year, they are considered married for federal tax purposes.

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