Bucks Blog: How Supreme Court Decision Affects Gay Couples

The Cost of Being Gay

A look at the financial realities of same-sex partnerships.

Now that the Defense of Marriage Act, the federal law that defined marriage as a union between one man and one woman, has been dismantled, many same-sex couples will gain access to a long list of federal benefits that were previously only available to their opposite-sex peers.

An article in print and on The Times’s Web site outlines how same-sex couples will be affected. Here are more details.

Federal income taxes. As the story notes, married couples living in states where same-sex marriage is legal will be able to file joint federal returns. That should save some couples money, especially when one person earns much less than the other or does not work at all. High-income couples with two working spouses will probably pay more.

That said, filing jointly can make even lower-income couples ineligible for certain tax savings, like the earned-income tax credit. Ultimately, the tax consequences will depend on where couples live and what their income and particular circumstances are.

Couples who would have saved significant sums by filing jointly might want to consider amending their recent tax returns. Such amendments have been permitted for the last three tax years, according to Patricia Cain, a professor at Santa Clara University School of Law and an expert on sexuality and federal tax law. That means many taxpayers can refile for tax years 2010, 2011 and 2012. The three-year clock started on April 15 for people who filed on or before that date, she said, but those who received a filing extension have three years from the date they filed.

A married same-sex couple in which one spouse earns $100,000 and one stays at home with their child could save nearly $4,200 in federal taxes by filing a joint federal return, according to Pan Haskins, an accountant in Oakland, Calif., who works with gay couples. But domestic partners in community property states, where they already had the benefit of splitting income between their returns, would pay about $600 more than they do now.

Same-sex couples with high incomes will hit the top tax bracket of 39.6 percent faster when filing jointly. Individuals do not reach the highest bracket until they earn $400,000, but couples begin paying that rate on joint earnings above $450,000, Professor Cain said. People who think they are likely to reach that threshold can submit new W-4 forms with their employers to increase tax withholding.

What remains unclear is whether same-sex couples married in states where gay unions are legal could file joint federal returns after moving to a state where they are not. “There has been a lot of discussion about whether the I.R.S. could recognize someone married in Massachusetts but living in Georgia,” Professor Cain said. “I think they have the power to do that, but no one seems to think they will do that. I think they will wait for guidance from the White House.”

The other big question is whether same-sex couples in civil unions and registered domestic partnerships can file joint returns. The I.R.S. typically looks to the taxpayer’s state of residence to determine whether someone is married. But a letter from the office of the chief counsel of the I.R.S., written in 2011, states that an opposite-sex couple in a civil union in Illinois should be treated as married for federal tax purposes. “The I.R.S. would have the power to interpret the word spouse,” Professor Cain said, adding that the Internal Revenue Code does not define it.

Medicaid. Having a federally recognized marriage can help or hurt an individual when it comes to Medicaid programs, “or perhaps even some of both,” said Vickie Henry, a senior staff lawyer at Gay and Lesbian Advocates and Defenders. The fact that both spouses’ incomes will be used to determine eligibility may hurt some couples. But if one spouse is in a nursing home or other long-term care institution, the couple may benefit from Medicaid’s “spousal impoverishment” provisions, which shield some of the household’s combined assets from the program’s reach so that the healthy spouse can continue to tap those resources.

Medicare. Individuals may be eligible for free Part A coverage, which generally covers hospital services and nursing homes, based on a spouse’s earning record, according to the Medicare Rights Center. Married people may also be able to delay enrolling in Part B coverage, which covers things like preventative visits to the doctor, while a spouse is still working and for up to eight months afterward. Before, individuals who were on a same-sex spouse’s plan but did not sign up for Medicare in the year they turned 65 had to pay a penalty for every year they were not covered by Part B or insurance as a result of their own work.

How will the decision affect you and your family?

Article source: http://bucks.blogs.nytimes.com/2013/06/26/how-supreme-court-decision-affects-gay-couples/?partner=rss&emc=rss