Note: This byline is part of a special series in celebration of diversity & inclusion. Here, Marc Ackerman, private wealth financial advisor at Wells Fargo Advisors, shares tips for same-sex couples filing federal income taxes.
Marc has dedicated 20 years to delivering independent counsel to clients. He is passionate about helping others and enjoys knowing his clients are prepared for critical financial events in their lives. Additionally, Marc helps families integrate their unique values into their wealth plans and focuses on philanthropic planning and social impact investing.
Same-sex married couples can file as married, either jointly or separately, at both the federal and state level. But does simply checking a different box on your tax forms guarantee a better outcome? Not necessarily.
If you and your partner earn roughly the same amount of money, filing jointly could bump you into a higher tax bracket. On the contrary, if one spouse earns little or no income, and the other is the primary wage earner, filing jointly may result in paying less taxes. In other words, by tying the knot, you may wind up owing Uncle Sam less than if you remained single.*
DOMESTIC PARTNERSHIPS AND CIVIL UNIONS
Although a handful of states recognize domestic partnerships and civil unions, the IRS does not. So, while these designations may offer some of the same rights and responsibilities available to married couples, it’s only at a state level and on a state-by-state basis.
TAX BENEFITS THAT APPLY TO ALL
Same-sex married couples grappling with how to file their tax returns can’t count on a one-size-fits-all solution, and should consult with their tax advisor. However, here’s what you can count on:*
• The ability to transfer an unlimited amount of assets to your spouse, free from federal gift or estate taxes, either during life or at death.
• The right to leave your spouse property upon your death that doesn’t come with a heavy estate tax bill due to the unlimited marital deduction.
• More tax-planning options upon inheriting your spouse’s retirement account.
• The right to open an Individual Retirement Account on your spouse’s earnings record, if you are unemployed.
Indeed, the tax benefits afforded to same-sex spouses are on par with those of heterosexual spouses. If you’re already married or thinking of getting married, do take the time to talk with your tax advisor to see how your marital status might impact your income tax and your financial future as a married couple.
This article was written for Wells Fargo Advisors and provided courtesy of Marc Ackerman, Financial Advisor in Los Angeles at (310) 444-6515.
“Will getting married help or hurt your tax rate?” by Roberton Williams, The Christian Science Monitor, posted Aug. 21, 2012
“Tax Planning for Newlyweds,” Kiplinger’s Personal Finance, updated January 2015, “Tax, Estate Planning, Benefits Opportunities After Supreme Court’s Same-Sex Marriage Decision,” by Ashlea Ebeling, Forbes.com, posted June 26, 2015
“Answers to Frequently Asked Questions for Registered Domestic Partners and Individuals in Civil Unions,” IRS.gov
“Tax Topics: Marriage Penalty,” Tax Policy Center
“Same-Sex Couples Still Face Tax Nightmares,” by Blake Ellis, CNN Money, posted March 5, 2014
“How Gay Marriage Became a Constitutional Right,” posted July 1, 2015, The Atlantic
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