NOW WHAT? TAX & HEALTH BENEFITS AFTER DOMA

Yes! DOMA is gone, and the rights of same sex couples have taken a huge step forward. What are the implications for your taxes and health benefits?

If you are legally married and live in a state that recognizes this*, you must file your taxes “married filing jointly” or “married filing separately”. Joint filing is generally a better choice; many tax breaks are limited with separate filing. Occasionally though, separate filing is the preferred option — e.g., in Rhode Island, if both individuals are high wage earners then separate filing may save money – the vagaries of state tax codes can create these anomalies. Married filing joint also confers joint liability – till death do your debts part. Helen might have some issues about Joan’s business reporting, or Alex may not want “his” tax refunds reduced by Jim’s old tax debts. You can be happily married and still make such choices.

Might you actually pay more taxes from being married? Possibly! The “marriage penalty” sometimes kicks in if both spouses are high wage earners. You also lose the opportunity to split deductions or claim your unmarried partner as a dependent.

Health insurance parity in these states is also great news –if your employer provides health benefits to your spouse this is no longer taxed back to you on your W-2 (don’t you hate that?). Or if you are paying for your spouse’s health care you should now have access to pre-tax benefits on a family wide basis.

But – always a but! The advent of the Affordable Care Act (Obama Care) and its “premium assistance tax credits” may actually work to the detriment of married couples in states that recognize your union. Say each partner makes $40,000; your joint incomes may exceed the “household limit” for the credit that might otherwise be available to each of you as unmarried. I am not saying don’t marry because of this. But it’s best not to be caught by surprise.

This is just a smattering of the happy issues same sex couples now have the privilege of confronting! The ruling is new and guidance from federal and state agencies will be forthcoming; some matters will still need to be resolved in court. Stay tuned!

* It is expected that the IRS will treat you as married based on your residency, if the state you live in recognizes same-sex marriage, then you are considered married for federal purposes. However, experts have pointed out that the IRS recognizes common-law marriage for federal taxes no matter where a couple lives as long as their marriage was valid where entered (“place of celebration”—love that term). Again, stay tuned!

NOTE>
Every situation is different and federal and state tax laws are subject to change. This article is presented for informational purposes only and is not intended to substitute for obtaining tax or financial advice from a tax or other business professional.

By | 2013-07-29T20:48:46+00:00 July 26th, 2013|POPULAR ON GET|Comments Off on NOW WHAT? TAX & HEALTH BENEFITS AFTER DOMA

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