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News, analysis and fact-checking of anti-gay rhetoric
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For several years, California law has treated couples in domestic partnerships exactly the same as marriages, including in how income tax returns were filed. But the federal government’s DOMA has banned any recognition of same-sex couples as married and the Internal Revenue Service has treated them as though they were two unrelated individuals. This has resulted in the peculiar situation in which a couple files as married for state tax purposes, and then files separate federal returns in which each reports their own individual incomes and deductions.
Ryan
June 2nd, 2010 | LINK
I’m not sure how good this is, money-wise. If I understand the article correctly, gay couples still can’t file married with their federal returns, they just have to split their combined income 50/50. If they made roughly the same amount already, nothing will change. If one person makes all or most of the money, then their personal tax liability will be a lower percentage but then their spouse’s tax liability will be higher. Example: Bob makes 100000 grand a year and Tim stays home. Bob owes about 30 percent of his wages in taxes, Tim owes none. If they split it, they’ll each have to report fifty grand, which is a tax liability of about eighteen percent each. (which combined, is more than Bob’s original 30). Again, unless I’m misunderstanding the article, I’m not sure how this is a good thing.
johnathan
June 2nd, 2010 | LINK
Perhaps it is not necessarily always great money-wise, but it is a good step in the right direction for the GLBT community in terms of recognition. Of course, some people will be flustered because they will be treated as equals in status and, thereby have to end up paying MORE. Nevertheless, does the recognition of equal worth as a couple in the eyes of the law FOR ALL not outweigh the duty to pay more in taxes for a few?
Ryan
June 2nd, 2010 | LINK
It’s not recognition of equal worth. The hypothetical gay couple is still filing separatetly under this change; they’re just spliting their assetts. A straight married couple filing that way get tax breaks that gay people won’t get.
Jose Soto
June 2nd, 2010 | LINK
Why not abolish the IRS all together and just not deal with this mess. It would benefit everybody in this country, straight and gay.
Timothy Kincaid
June 2nd, 2010 | LINK
Ryan,
I’m sorry but you are mistaken. While this is (I agree) no recognition of equal worth, in most unequal income situations there will be a significant tax savings (In your example above you need to consider that each partner is only taxed on half of the income).
Aaron
June 3rd, 2010 | LINK
@ Jose:
I suppose we could abolish federal taxes and the tax agencies that regulate them, but then the federal government would die, we’d have no military beyond state militias, and anarchy would rule in the states that couldn’t deal with the pressures of becoming their own country.
customartist
June 3rd, 2010 | LINK
Ryan is exactly correct.
This change finds only ways for the IRS to collect more. It does not allow one partner (or legally married gay spouse, which I happen to be) to claim the other partner on tax returns, nor does it address the After-Tax status of healthcare premiums, nor does this address the ability of a partner to collect on the other partners Social Security Benefits as a straight wife can do with her higher-earning Husbands benefits, etc, etc, the list goes on…
This is ONLY a way for the IRS to collect more, and of little or no real benefit to Gays. Not being unnecessarily negative, just realistic.
I fail, too, to see how this is not in conflice with DOMA? Help me here please?? _______________
DaveM
June 3rd, 2010 | LINK
Ryan:
Using your numbers for 2009, and assuming no other complications:
Under the old law:
Bob has AGI of 100000
minus personal exemption of 3650
minus standard deduction of 5700
Taxable income: 90650
total tax 19109
Tim does not file.
Under the new law:
Bob and Tim each have AGI of 50000
minus personal exemption, standard deduction
Taxable income: 40650 each
tax 6356 each
total tax 12712
Savings of $6397
Tina-cious.com
June 3rd, 2010 | LINK
Ummm… I’m sorry I’m confused, why is this just California?
Splain Lucy! :)
Timothy Kincaid
June 3rd, 2010 | LINK
Tina,
An IRS ruling would not necessarily apply just to California. If there are other states in which same-sex spouses/DPs have community property laws that impact state taxes, they would presumably use the same methods.
This is something that will have to be determined on a state by state basis so if you think this applies to you, call your accountant.
Emily
June 3rd, 2010 | LINK
Ryan,
I’m sorry but you are mistaken. While this is (I agree) no recognition of equal worth, in most unequal income situations there will be a significant tax savings (In your example above you need to consider that each partner is only taxed on half of the income).
Ryan
June 3rd, 2010 | LINK
DaveM, you’re right in that example. I failed to consider that both would receive a standard deduction. I wonder how they will decide things like withholding, though. And itemized deductions. Can you report someone else’s withholding on your return? If not, one person may get underpayment penalties. Do you have to split itemized deductions equally? This is a very long way from allowing a gay couple to file married, and won’t always be advantageous. There should at least be an option to file separately, like straights have.
customartist
June 5th, 2010 | LINK
For example: I and my husband, married during the legal window in California, have no Domestic Partnership, and therefore the IRS, under its revised position, cannot go after my husbands (larger) income in order to collect any tax debt that I might have, since DOMA prohibits federal acknowledgement of Gay Marriage.
This, I contend, is the root motivation for their “re-assessment”. Collect more taxes, but give none of the same benefits as marrieds.
Currently, I am managing home renovations, have no reported income, yet my husband cannot count me as a dependent on his return.
Eric
June 6th, 2010 | LINK
The ruling applies to RDPs and same sex married couples in community property states. Regarding the impact on total taxes paid, it results in LOWER total taxes unless each partner makes exactly the same amount of taxable income. This has been modeled extensively by gay tax experts, and they have not found a scenario that results in higher taxes than when filing individually. An equally important point is that this “income splitting” approach results in significantly LOWER total taxes paid than would be the case for a federally recognized married (straight) couple filing a married filing jointly return. So, gay couples get to pay lower taxes than straight couples. We should be looking forward to the argument from straights that we shouldn’t get to pay lower taxes – well, we wouldn’t if we were able to have federally recognized marriages. Next move…
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