Income Tax Issues for Same Sex Couples

ByLauren Sweeney

Currently six states (Connecticut, Iowa, Massachusetts, New Hampshire, New York, Vermont and Maryland as of January 2013) and District of Columbia recognize same sex marriages, but the Federal government does not because DOMA defines the term marriage as a legal union between one man and one woman, codifying the nonrecognition of same sex marriage for federal purposes.  Therefore, for federal income tax purposes, same sex married couples are required to file separate individual income tax returns each with the filing status of “single” or “head of household” even if they can file their state returns with a married status.  This presents several federal income tax issues for married and unmarried same-sex couples some of which are addressed below.

Is filing a tax return as single truthful?
Filing as a single person presents an ethical issue for many same-sex married couples. The federal income tax return requires a signature beneath the declaration “Under penalties of perjury, I declare that I have examined this return and the accompanying schedules and statements, and to the best of my knowledge and belief, that they are true, correct, and complete.”   Many couples have official documents that indicate that they are not, in fact, single.  Lambda Legal recommends that a taxpayer place an asterisk next to the check box on the form and to attach a disclosure that not only eases apprehension about the truthfulness of one’s return, but also may help protect against claims that one disclaimed the legal validity of one’s marriage.  Click here for a link to Lamba Legal’s sample disclosure and their website.

Can one partner claim the other as a dependent?
If one partner is working, and the other partner is staying at home, the stay-at-home partner could qualify as a dependent and the working partner could take an exemption for him/her.  However, to qualify the stay at home partner must:

  • Have earned less than $3,700 in gross income or unemployment benefits
  • Have received more than half of their support from the working partner in the form of food, shelter, clothing, education, and medical care
  • Be a U.S. Citizen

What if a same sex couple owns their own home and both of their names are on the mortgage? 
If both partners contribute to the mortgage payments, the interest tax deduction could be split any way it fits the couple best.

What if the working partner provides health insurance for a stay-at-home partner? If the working partner can provide insurance for the stay-at-home partner through the working partner’s employer’s plan, the insurance is deemed to be an extraneous benefit.  As a result, the stay-at-home partner receiving the health insurance must report the value of the insurance benefits as taxable income on his or her tax return.  Click here for further analysis. 

What if a couple has children together?
If both partners are legal parents (biological or adoptive) of the same child, either of them may claim the child as a dependent – but not both. Claiming a child allows a taxpayer the benefit of filing as “head of household,” which has more tax benefits over filing “single.” If a couple has more than one child together, each partner may be able to file as “head of household” by each claiming one child as a dependent. There are some very specific requirements in order to file as head of household.

 In addition to being unmarried or “considered unmarried” on the last day of the year, a taxpayer must have paid more than half the cost of keeping up a home for the year and had a “qualifying person” living in the home for more than half the year. A “qualifying person” for “Head of Household” status is (1) a taxpayer’s “qualifying child” (2) a taxpayer’s parent who meets the requirements of a “qualifying relative” or (3) A “qualifying relative” that is otherwise related to the taxpayer.  Click here for IRS definitions of qualifying child and qualifying relative.

What about state income tax returns?
All six states and DC that recognize same-sex marriages allow taxpayers the status of married filing jointly.

The following states recognize domestic partnerships and allow joint filing:  California (file as Married/Registered Domestic Partners filing jointly), Oregon (Registered Domestic Partner filing status), District of Columbia (file as Married/Registered Domestic Partners filing jointly). 

The following states recognize civil unions and allow joint filing: Illinois (for income tax purposes, partners are considered spouses), New Jersey (file as Married/Civil Union filing jointly), and Vermont (file as Married/Civil Union filing jointly).

If taxpayers live in a state that allows a same sex couple to file jointly, at least four tax returns will have to be prepared and filed altogether:

  • Partner 1 tax return
  • Partner 2 tax return
  • One “dummy” federal tax form as married filing jointly to reference
  • One joint state return

Due to the intricacies of tax and state law, it would be advisable to consult with a tax professional.

 IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this communication was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any matters addressed herein.