As if tax season isn’t complicated enough, it can be a complete nightmare for same-sex couples. Same-sex couples face numerous challenges when it comes to filing income tax returns.
While it is important for everyone to keep good records for tax time, it is even more critical for same-sex couples to do so. Extra time and planning will be necessary in order to ensure you are getting the best return possible.
While federal rules are the same for all same-sex couples, when it comes to state tax preparation, rules vary from state to state. Some states recognize same-sex couples as domestic partnerships while others do not.
Here is a look at what you need to know if you are a same-sex partner:
Federal Income Tax Returns
The federal government does not recognize same-sex couples as domestic partners; therefore, members of same sex couples must each file their own federal tax return as a single filer. This essentially means that same-sex couples are required do double the work and deal with the additional complications that come with filing separate returns.
What heterosexual couples take for granted, same-sex couples will have to look at more carefully to determine the following:
- If a same-sex couple has children, they will need to decide which partner is going to claim each child as a dependent.
- One or both parties may be able to claim head of household.
- Deductions – such as interest paid on a home mortgage, charitable contributions, etc. – can only be claimed on one return, so same-sex couples will need to decide which partner will claim each eligible deduction on his or her tax return.
State Income Tax Returns
While preparing and filing federal tax returns as a same-sex couple can be challenging, filing state returns as a same-sex couple can even be more complicated, depending on where the couple lives. First of all, there are numerous states that do recognize same-sex couples as being domestic partners, including California, Washington, New Jersey and Maryland, to name just a few. For states that do not recognize same sex partnerships for tax purposes, just like your federal return you will need to file separately in the single filing status.
Additionally, many states require same-sex couples to file joint income tax returns. While this is great news in that you are able to file jointly, it is not as simple as it may seem, for these reasons:
- While you may file jointly and follow all of the same rules that apply to heterosexual partnerships, filing out your return will be complicated.
- The state return will ask you to fill in the information from your federal return. The state form assumes that you filed jointly and so those are the figures that they are looking for.
- If you decide to file your state return jointly, most tax experts recommend that you fill out a joint federal return form. This will be used just for your own purposes so that you can obtain accurate figures to claim on your joint state tax return. Of course, however, this means more work for you.
Other Things to Know
As you can see, if you are part of a same-sex couple, the amount of time and energy that goes into tax preparation can be daunting. Also, more often than not, same sex couples will end up paying more in taxes than their heterosexual counterparts since they are unable to pool their income and take joint deductions – at least on federal returns.
Due to all of the aforementioned complications, it is advisable for same-sex couples to seek out tax preparation help from a tax expert who specializes in same-sex tax issues and will be able to effectively guide you through maximizing your tax returns. Expect to pay more for their service than heterosexual couples, though, since there will be more forms to fill out and more work involved in helping you maximize your return.