It might seem odd to be thinking about taxes in the fall, but for LGBT people who are considering buying a home, it’s important to understand how taxes affect you before April 15. Fortunately, things have become more simplified since August of 2013 when the IRS ruled that all legally married same-sex couples would be put on equal footing with opposite-sex couples when it comes to federal taxes. This ruling held for all married same-sex couples even if they currently lived in states that banned gay marriage. However, because they’ve never filed joint taxes before, many same-sex couples don’t know exactly what this means for them. In most cases, it’s best to get professional help. Luckily, you can file taxes online now a days and get great discounts by just visiting websites like https://www.raise.com/coupons/hr-block.
Federal Tax Returns
LGBT couples can now file either a joint return or file as married filing separately. This gives them access to a number of different tax benefits. They can also now claim children as dependents, together on a joint return, and they may be eligible for certain child tax credits. Another option is for one of the spouses to file as the head of household, which will most likely result in paying fewer taxes. It may even be possible for both to file as married filing separately and, if the family has more than one child, each spouse claims at least one child as a dependent. Both then may be eligible for head of household status. Your LGBT real estate agent may be able to help you in this area or may know of a tax professional who can assist you.
State Tax Returns
In states that recognize marriages or have put domestic partnerships or civil unions on the same level as marriages, couples can file state taxes jointly. Again, a tax professional can help you navigate through this unknown legal arena if you’re not familiar with how joint tax returns work.
If you live in a state where marriage is not recognized, you’ll have to file as married on your federal taxes and single on your state taxes. There’s no other option at this time.
The Tax Benefits of Marriage
Couples who are legally married are exempt from many different federal taxes on the transfer of real estate between the couple, both while they’re living and after one of the spouses has died. A person can give as much as $5 million in gifts to another without paying taxes on it. There are some gifts that are exempt from this, though. If a same-sex couple is recognized as being married, one spouse can inherit a large amount of property without paying taxes on it. If they are not recognized as being married, though, one spouse may have to pay a large amount of taxes upon inheriting the property.