Friday, December 26, 2014

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Same-Sex Married Couples Can File Joint Tax Returns for First Time

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TWC News: Joint Tax Filing For Same-Sex Married Couples May Mean Higher Rates and Benefits
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Same-sex married couples can now file a joint tax return, but they may be subject to higher tax rates. NY1's Tara Lynn Wagner filed the following "Money Matters" report.

This tax season marks the first time same-sex married couples can check "married" on their Federal Tax Return. It may also mark the first time they're hit with the so-called Marriage Penalty.

"If you have two incomes, and you combine those incomes, your tax rate may be higher than if you filed separately. Now that's a penalty tax that applies to all married couples. There's nothing discriminatory about it other than it discriminates against married couples," says Robert Fishbein, vice president and corporate counsel for Prudential Financial.

That higher combined income may also price you out of some deductions and credits that saved you money in the past.

"There may be education tax credits, where you combine the incomes and presto, you're no longer eligible for that tax credit," Fishbein says.

Before you cancel the caterer, however, there are benefits as well. Take, for instance, health insurance. Prior to the DOMA ruling, if one person in a same-sex marriage extended their health insurance to include their spouse, the value of that coverage was taxed as income at the federal level.

"That will no longer be the case because that same-sex spouse will be covered by the plan," Fishbein says.

Also, filing your taxes will be a lot easier and probably cheaper this year if you also live in a state that recognizes your marriage.

"Before, you would have to file a federal return as two separate people, as single people, and then you would have, in the states that recognize the marriage, you would file a joint return. So a lot of state returns depend upon what happened in the federal returns, so it got a little bit complicated for those people, and in many cases, probably had to pay a tax accountant to help them figure it out," says Peggy Riley, an IRS spokesperson.

However, that burden still exists for couples who wed in a state where their marriage is legal but live in a state where it's not.

The IRS is also giving same-sex couples the option to go back three years and amend their tax returns.

"If you want to, if it's beneficial to you," Riley says.

If it's not, well, just leave well enough alone.

Of course, taxes aside, there are many other instances where having a recognized marriage is beneficial.

"Definitely estate tax planning purposes, definitely a major, major benefit, retirement planning purposes, major, major benefit. However, come April 15, it's questionable," says Alan Kahn, a certified public accountant.

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