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Tax Equality Now in Five States

by Kilian Melloy
Tuesday Mar 18, 2008

If the only two certainties in life truly are death and taxes, GLBT people in five states and the District of Columbia have taken a step that brings them the rest of the way to true equality.

As reported by Business Wire in a Mar. 18 story, the states of CT, MA, and VT have allowed same-sex couples to file their state taxes jointly for a few years now.

Starting this year with the 2007 tax returns, CA and NJ join that trend, along with the District of Columbia.

Business Wire warns that equality, in this case, may bring with it a bit of a headache: as married same-sex couples in MA and partners in civil unions in VA and CT have learned, the 1996 Defense of Marriage Act (DOMA) makes it legal for the federal government to ignore state-granted domestic privileges. State and federal tax returns for couples taking advantage of joint filing in the states that permit it may have to work out their tax bill twice: once to determine what they owe the state as a couple, and again to figure out what Uncle Sam wants from each individual partner.

That cold mean preparing a total of four returns in all, says Business Wire: two federal returns (one for each partner), a mock federal return filled out as if the couple were allowed to file jointly with Uncle Sam, and finally a real state return base don the results of the mock federal return.

But preparing the mock federal return is not as easy as it might sound. Federal tax rules make the proposition more involved than simple addition of each partner's mock federal return. Business Wire identified several areas in which the going could get sticky, including Capital Gains / Losses, Real Estate Losses, the deduction for the interest on a home mortgage, Roth IRA, and miscellaneous expenses. (For a more detailed explanation, click the link above. Additional links at the Business Wire article also lead to state-specific tax return rules.)

The extra effort may not be worth it for everyone: Business Wire reported that in CA, about 12 percent of domestic partners who file jointly have to pay more in state taxes than if they had filed separately. However, about 60 percent actually saved money, to the tune of around $500.

Another option is to file separately but as a married couple. By going the "married-filing-separately" route, couples in many of the states with family-friendly tax provisions may find they save even more.

Kilian Melloy serves as EDGE Media Network's Assistant Arts Editor. He also reviews theater for WBUR. His professional memberships include the National Lesbian & Gay Journalists Association, the Boston Online Film Critics Association, The Gay and Lesbian Entertainment Critics Association, and the Boston Theater Critics Association's Elliot Norton Awards Committee.


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