1. Shuffling down the tax rate. In many relationships, one spouse earns more than the other. Sometimes, the higher income could -for an individual--mean a much higher tax rate. But a married heterosexual married couple -by filing jointly-- can, in essence, shuffle off the higher tax rate on the larger income, says Eshghi, "because the Married Filing Jointly category allows for income splitting so the higher income doesn't get bumped up to the higher tax rate." Because gay married couples can't filed as Married Filing Jointly, she says, "they lose the benefit of being able to pay less taxes and, in fact, pay more than similarly situated opposite sex couples would pay."
2. Spousal IRA deduction. For married couples filing jointly, the tax code allows one spouse to contribute up to $5,000 to an Individual Retirement Account for the other spouse. There are limits, but it provides straight couples with yet another valuable deduction that gay married couples can't have.
3. Tax-free gifting. Anytime you gift something -cash or otherwise-- worth more than $12,000 to someone, you have to pay the IRS a tax on that. Unless you're married to that person and -because of DOMA--that person is of the opposite sex. In other words, one spouse can put the other spouse on the title of a house and there's no tax to be paid owed. But if a gay person tries to do the same for his or her same-sex spouse, then he or she must pay the "Gift Tax" on the value of half the house minus $12,000. (In tax year 2009, the exclusion goes up to $13,000.)
4. Tax-free health coverage. Employers often pay all or part of an employee's health insurance coverage, including family plans that cover a spouse and children. For tax purposes, the cost of this coverage is not considered to be part of the employee's income. But, if the federal government -as under DOMA--does not consider your spouse to be a spouse under federal law, then it looks at the health coverage for your same-sex spouse as if it is additional income provided by your employer. You pay taxes on that, where your straight colleague does not. One plaintiff couple in GLAD's lawsuit challenging DOMA estimates they pay about $1,200 per year more because of this disparity.
5. Tax-free estate transfer. When one spouse dies in a straight married couple, the surviving spouse often receives the full value of their estate and assets. And the surviving spouse pays no tax on that gain, which is often in the hundreds of thousands of dollars, or millions, if a house is involved. But if a spouse in a same-sex marriage dies and leaves all his or her estate and assets to his or her spouse, that surviving spouse has to pay taxes on the value above $1 million.
PrideSource: Five ways that gay couples lose big on taxes
Originally printed 3/19/09 (Issue 1712 - Between The Lines News)