Same sex marriage is one of the hottest issue for years now. People are fighting for equal rights and protection, fighting for social recognition and to make relationships legal. Civil rights advocates have been in the battle field and that battle was won. In the United States, same sex marriages has been established in over 50 states as a result of the Supreme Court ruling in the landmark civil rights case of Obergefell v. Hodges. It pinned a decision that, the right of same-sex couples to marry on the same terms and conditions as opposite-sex couples, with all the accompanying rights and responsibilities, is guaranteed by both the Due Process Clause and the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution.
In 2013, US congress repealed the Defense Marriage Act (DOMA) that opened the way for same sex couples to file their tax returns using the Married Filing Jointly or Separately status. The statute also allows to file amended returns for up to three years prior or going back to 2010. This new tax rules are largely similar to couples of opposite genders, and because the IRS looks to state laws to determine marital status, there are some additional stipulations for these couples which will not apply to traditional married couples.
If you have been legally married in a U.S. or any foreign country that recognizes same-sex marriage, the federal government recognized your marriage for federal tax purposes regardless where you live in the U.S. Here are some tips when it comes to filing taxes for same-sex couples to consider.
1. Joint Return Status and claim for dependent.
Since DOMA was repealed they can now file joint tax returns. In 2015, between the individual and joint tax filing if the annual income is $100,000: individual tax return subjects a person to $21,071.25 taxes, while the joint filer only pays $16,587.50. The difference was actually very significant.
Just as heterosexual married couples, they can also claim their dependents. The claim of a dependent can make a big difference on the income tax bill, couples filing jointly will gain an exemption up to $4,000.. It reduces the amount of taxable income and the overall tax liability. A dependent is someone whom you provide support who is either under the age of 19 or who is a full-time student up to age 24. They must also need proof that they provided more than half the support to a child, and must be living with them for a significant period. Qualifying dependents may include your child, a sibling, step sibling or another relative. Foster children also are eligible. Keep in mind that if a same-sex couple decides to go the married filing separately route, only one can claim the child
2. Tax-Free Employee Benefits
Beginning 2014,they can now enjoy the benefits of tax-free and employer-sponsored benefit plans. Spousal health insurance benefits are now excluded from income and eligible for pre tax treatment. If one spouse works for a company that offers health care plans or flexible spending accounts, the other spouse could now be eligible for coverage. It eliminates the need for same-sex couples to have multiple benefit plans.
3. Amending Past Three year tax Returns
If couple was married but filed an individual tax returns in 2010, 2011 or 2012, they may consider amending those past tax returns and file as joint instead. The amount of taxes can differ greatly from individual to joint returns, and would mean into a significant tax refund. If the couple is interested in doing, they should file the amendment before April 15 if they want to include these statements. You may not be required to amend your returns, but you may recalculate them to see if doing so will offer a refund or other tax advantages. If one spouse was the primary earner, filing an amended return will work in your favor
4. Beware of marriage penalties
The combined incomes of a married same-sex couple filing jointly may often placed them in a higher tax bracket. For instance, if the combined earnings of the couple is $150,000 annually it would be taxed at 28%, when in previous years they had filed singly and were taxed in the 25% bracket.
5. Tax-Free Gifts
Like any other traditional married couple, same-sex married couples may now give unlimited tax-free gifts to their spouse. This may only benefit the high earners, but it also means that products like IRAs can be given to a spouse without any tax penalty. The annual gift exemption limit was $14,000 and any excess of this amount will require you to pay a gift tax. You will need to file a gift tax return or Form 709, whether you exceeded the limit or not. This will keep IRS informed of the gifts you are bestowing on others.
6. Offsetting Capital Gains and Losses
Same-sex couples have now the ability to offset capital gains with losses. They can offset the taxes by combining the two transactions, if ever one spouse realizes a capital gain and the other a loss.. This way will effectively doubles the number of investment tax possibilities.
7. Home Sale Exclusion
For married couples they can exclude up to $500,000 in the sale of primary residence, while for single taxpayers can exclude up to $250,000.
8. Deductible Alimony
Payments made to a spouse based on a court order such as alimony may now be tax-deductible for same-sex spouses instead of being treated as a taxable gift.
9. Social Security Benefits
The Social Security Administration currently offers benefits for same-sex spouses only in the states that allow same-sex marriage. However, when and if the state laws change, this standard will likely be retroactively applied, meaning couples that claimed Social Security benefits that weren't paid out before will be compensated for them.
