Tax Tips for Same-Sex Couples

Update Dec 13, 2022:  President Biden just signed the Respect for Marriage Protection Act into law to provide protection of same-sex and interracial marriage. The Respect for Marriage Protection Act came out of concern that the Supreme Court could reverse its support for nationwide legal recognition of same-sex marriage passed in 2015.

In 2013, the IRS began recognizing marriages between same-sex spouses if they were valid under state law where the marriage took place. Since 2015, same-sex marriages were legalized in all states. That means that same-sex marriages are subject to the same tax rules as all other marriages in all states.

Now same-sex spouses, like all other married people, must file using a married filing jointly or separately filing status and can reap the same tax benefits as heterosexual married couples. One of the biggest benefits for same-sex married couples that live in states that didn’t recognize same-sex marriage is legally married same-sex couples can now simplify the tax preparation process filing one federal and one state tax return and take advantage of tax benefits reserved for married couples.

Married Filing Jointly and Lower Tax Rates

Because there are lower federal tax rates for couples who file married filing jointly compared to filing as single, most married couples will see tax savings or a “marriage bonus.”

But at higher income tax levels, a difference begins to emerge between unmarried individuals filing as single and married couples filing jointly. If both parties have similar high income, they may owe more tax. If their incomes are widely different, they may owe less.

Filing Separate Returns Has Certain Limitations

A married couple may want to file as married filing separately in order to segregate the income of one of them, or if they don’t agree about how tax refunds should be shared or who should pay any additional taxes due.

But filing separately has several drawbacks and limitations. A child of both parents can be claimed only on one parent’s return. If one spouse itemizes deductions, so must the other spouse, even if the other spouse would be better off claiming the standard deduction.

Forget taking special tax deductions and credits, such as interest on student loans, child and dependent care credit, earned income tax credit, exclusions for savings bond income used for education, education credits, credit for adoption expenses, and credit for the elderly or disabled. None of these are allowable on separate returns. People who are married filing separately will pay tax on more of their Social Security benefits, can’t do an IRA rollover, and can claim only half the capital losses they could on a joint tax return.

Don’t worry about knowing any of these tax laws. You can come to TurboTax and fully hand your taxes over to a TurboTaxLive Full Service tax expert who can prepare your taxes from start to finish in one meeting.  TurboTax Live Full Service tax experts are available in English and Spanish year round. You can also use TurboTax TaxCaster to estimate whether your tax situation will be better filing married filing separately or married filing jointly.