Tips for gay couples as tax time approaches

Tax laws weren’t written with LGBT families in mind, but there are ways to make them work for you

DAVID TAFFET | Staff Writer
taffet@dallasvoice.com

A new tax ruling in California that appears to be a first step toward federal recognition of same-sex marriage will actually cost gay and lesbian couples there more money, according to Jon Chester of Sterling Bookkeeping and Tax Service.

In that ruling, the IRS said that registered domestic partners in that state must file as married filing separately.

“Married filing separately is the worst way to file a return,” Chester said. “We’re going to recognize you, but we’re going to have you file in the worst way a married couple can file.”

Ron Allen

Married filing jointly, he said, usually saves the most money and that filing is something same-sex couples cannot do on their federal taxes.

The so-called marriage penalty has been eliminated because a married couple gets to deduct twice the amount of a single person.

“But married tax brackets are much wider and save,” he said, so married couples filing jointly enjoy a tax advantage.

Chester had some other tips for same-sex couples in filing their returns.

He said that to take anything other than a standard deduction of $5,400, you must itemize.

Those deductions include property tax, charitable donations and medical expenses.

Chester said that if you support someone, you could take a deduction for that person.

Married couples who are recognized by the federal government regularly take deductions for dependents. He said gay people often do not think of that.

The person might be a child or a domestic partner. Chester suggested deducting for a parent that you support, even if that person doesn’t live with you. A parent in assisted living whose monthly bills you pay, for example, qualifies as a dependent.

He said it’s usually better for the partner making less money to claim any investment income and for the partner making more money to take any losses. The amounts can also be allocated proportionally, as long as no more than the total is claimed between the couple.

Jon Chester

Ron Allen, a CPA who used to work for the Internal Revenue Service, said that when a same-sex couple is sharing ownership and deductions on property, do three things to make the tax return audit-proof. Make sure both names are on the deed and on the mortgage and make payments from a joint account.

He said that for an account to be considered joint for tax purposes, both partners should make deposits into the account during the year. He suggested that even couples that kept their finances separate should make common household payments from a joint account.

Allen said that tax laws were not written with same-sex families in mind, but we must fit the laws to work for our families.

For instance, Allen asked, who deducts a dependent child when Texas doesn’t recognize a second parent adoption? He said that he has seen a number of cases where the adoptive parent stays at home and the non-adoptive parent earns most of the household income.

The non-adoptive parent may take deductions for the partner and child but will bear an extra burden of proof that married couples don’t need.

Allen said that when he went into business, he saw same-sex couples that used his practice because it was a safe place to reveal their relationship status. Now, he said, many of his clients come to him because tax preparers outside the community don’t know what to do with same-sex families.

Allen said that CPAs now are included in confidentiality rules. If one partner brings him tax returns for both members of the couple, he legally cannot answer any questions about the partner’s returns unless he has a power of attorney or a signed document.

“It’s just another case of us having to do something special,” he said. “A husband and wife don’t have to do these things.”

Couples dealing with issues of joint home ownership or other joint assets, adoption and disability and dependency issues should see a CPA who is experienced in handling these issues for the LGBT community, Allen said.

This article appeared in the Dallas Voice print edition March 25, 2011.

—  John Wright

Cooking up some lame duck soup

Can the Democrats use the lame-duck session to make good on all their promises to the LGBT community? If not, then maybe we should start looking for candidates who will keep their promises

Hardy Haberman | Flagging Left

Do you hear that quacking sound? Nope it’s not the AFLAC duck, but a lame-duck Congress.

During this session, members who have been ousted can take their parting shots and actually try to do some of the things they promised before the previous election.

You would think that would be as easy as duck soup. Heck, what have they got to lose?

Well, that remains to be seen. When Congress returns on Monday, Nov. 15, they will have a lot of work to do. Much of it is related to spending. During the last session, not a single spending measure passed — which means that if the government is not going to shut down, a stop-gap measure will have to be enacted.
Then there is the matter of those Bush-era tax cuts that are set to expire. These affect mainly the wealthiest Americans, and you can bet the GOP won’t let these die without a fight.

The Democrats have a stake in it as well. There was a token: The $1,000-per-child tax credit that would be pared down to $500 and some relief on the “marriage penalty” that will make this a tough pill to swallow for the left.

On the health care front, there is a provision on Medicare that cuts what doctors are paid by 23 percent. That most likely will have to be fixed.

And on the Social Security front, there is a proposed one-time $250 payment to some seniors who didn’t get a cost-of-living adjustment this year. That measure didn’t fly in the previous session, and there is no telling what will happen to it now.

There is lots of unfinished business that was put on hold prior to the election when both parties were afraid to do anything that could be used as ammunition against them during the campaigns. Now the big question is, will Congress actually get down to business and do their job?

Your guess is a good as mine.

And then there is the “elephant in the room,” or more appropriately the “donkey in the room.”

That mythic creature consists of the LGBT issues that are still just empty promises. DADT, an unjust policy that even Defense Secretary Robert Gates wants repealed, may or may not get addressed, much less the Defense of Marriage Act or the Employment Non-Discrimination Act.

Though some progress has been made on the human rights front, LGBT citizens are still second-class when it comes to employment discrimination, marriage and serving in the military.

Wouldn’t it be a wonderful thing if the politicians put away their rhetoric and actually looked at the inequity caused by this institutionalized discrimination?
Wouldn’t it be nice if the president used some of his remaining political capital to actually push the reluctant Democrats to do the right thing?

So far, even though President Barack Obama has repeatedly said DADT will be ended “on his watch,” there doesn’t seem to be any effort beyond rhetoric toward this end. I am beginning to doubt whether he or Congress has the political will (read “balls”) to pick up the LGBT hot potato.

After expending so much energy on enacting health care reforms, and being incredibly unsuccessful in framing the issue before the GOP dubbed it “Obama Care,” I don’t know if any further measures will happen.

Now, we have to rely on the remaining Democrats and those who have lost their seats to use the brief time of this lame-duck session to take up our cause, when they have a whole year’s worth of bills log-jammed in Congress. Since many of these representatives are not coming back to Washington after Jan. 1, our leverage with them is limited.

What can we do? Well, aside from the fantasy of the GOP suddenly deciding to turn gay-friendly, something that would blunt one of the most effective weapons in their arsenal of fear-based tactics, we might do well to punt.

Punting in this case means trying some unorthodox tactics.

Though I am loathe to say it, that might include more lawsuits like the Log Cabin Republicans tried against DADT. While I am still a bit suspect of their real agenda, which I believe was to embarrass the Obama Administration, at least it’s a shot.

Left-wing LGBT groups are going after the Defense of Marriage Act at a national level with lawsuits. This tactic will likely hit the brick wall of the Bush-era-packed Supreme Court, but it’s worth a shot.

Frankly, I am tired of being patient, and if the lame-duck Congress doesn’t deliver on its many promises to the LGBT community, then we might have to start finding new candidates who are actually socially liberal.

Unfortunately, that will be a much tougher recipe than duck soup.

Hardy Haberman is a longtime local LGBT activist and a member of Stonewall Democrats of Dallas. His blog is at http://dungeondiary.blogspot.com.

This article appeared in the Dallas Voice print edition November 12, 2010.

—  Michael Stephens

Tax tips for same-sex couples

Some of the special rights that heterosexual couples enjoy have to do with taxes. But depending on circumstances, gay and lesbian couples who marry may run into the “marriage penalty.”

Tax law was designed for June and Ward Cleaver. Dad is the breadwinner. Mom stays home and raises the kids. If she does have a job, she earns a lot less. The marriage penalty happens when both partners earn about the same amount. So if both partners are equal contributors, monetarily speaking, they’re better off unmarried for income tax purposes.

If a couple has children, a married couple takes a deduction on their joint tax form. Gay or lesbian couples with joint custody cannot. However, the deduction may have a larger impact on one tax form than on the other and either may take the deduction. Check with an accountant.

If you took advantage of the $8,000 tax credit to buy a new home, that credit must be split. The IRS has issued guidelines on that for “single” people who have purchased property with other “single” people.

The IRS allows a single person to file as “head of household” if that person has contributed more than other members of the household toward upkeep. Because of deductions, tax rates may be lower for head of household. Check with an accountant.

—  David Taffet