Calif. same-sex couples face new tax rules

March 3, 2011 7:29:16 PM PST
April's tax deadline is right around the corner and it brings enormous change for thousands of same sex couples in California, Nevada and Washington. Those states recognize the registered domestic partners or lesbian and gay marriages and they also have community property laws. This year for the first time those couples will be required to report their combined income on federal tax returns.

Asa DeMatteo and Tom Brady have been together 36 years and in 2008 they were legally married in California. This state grants same-sex couples, including registered domestic partners community property rights. Now the federal government is requiring those couples to report their combined or community income when they file their taxes.

"Basically everything that is community is split down the middle, half and half, half on one return, half on the other," IRS spokesperson Jesse Weller said.

It is called income-splitting. If a person makes $90,000 a year and their husband makes $10,000, under the new rules each must report $50,000 on their federal tax returns.

Tax accountant Karen Stogdill has been swamped with clients.

"What couples need to know is what they have that is community property and what they have that is separate property; these are typically concepts we haven't known about," Stogdill said.

Stogdill says most couples will see a tax break. Tax attorney Deb Kinney believes there is another big payoff with the federal change.

"They are using the words same-sex married couple, they are acknowledging registered domestic partners, they are looking at community property rights and in fact many of us will be protected by having that acknowledgement," Kinney said.

But DeMatteo and Brady consider the federal tax rules separate but unequal. While they can file their state taxes jointly just like married heterosexual couples, they are still required to file separate federal returns, which must now include their combined income.

"Frankly, I don't think I'm going through this rigmarole, I think I'm going to file married filing jointly and just take the consequences, see what happens," DeMatteo said.

There are 18,000 legally married same-sex couples in California and there are more than 50,000 registered domestic partners. All need to be taking a look at their federal returns and figuring out what to do.

Load Comments