What marriage equality means, in terms of money
Getting to marry the one you love regardless of the gender of your partner is something that we’ve been fighting for a number of years to have it accepted by society especially in terms of gay marriage. However, marriage isn’t without its costs and responsibilities. A financial planner in Arlington, Massachusetts explicates, “You’re telling the government: I will take care of this person legally and financially if something happens to them.” She shared this with Bloomberg Business in the context of numerous clients rushing to get hitched once Massachusetts legally recognized same-sex unions, only for most of them to unfortunately fail, later on.
As Adam & Eve describe, the Supreme Court ruling on June 26, 2015 marked one of the biggest victories for the U.S. LGBTQ community to date, but marriage comes with certain implications that everyone needs to learn about. This legal union is not only based on love as it is also an economical relationship, and what they say about love bringing us together and money tearing us apart is true, so here are a few things that same-sex couples need to know about marriage and money before getting hitched.
Getting married can alleviate the burden of income tax
Generally, filing for taxes jointly can save you and your spouse from paying higher rates than you would if you were to file separately, especially when there is a huge difference between incomes. Although the same cannot be said for couples with both partners earning six-figure salaries. According to H&R Block, a couple in a higher tax bracket are qualified for the “marriage penalty.” An unmarried couple that are separately earning $300,000 a year will pay the top tax rate at 33 percent, but if they do get married, the combined household earnings of $600,000 will be taxed at a whopping 39.6 percent. There’s always the option to utilize the filing status of “married filing separately” to limit the deduction, but those are rarely filed.
Married couples can file claims for refunds for previous tax years
If you’re wondering if you could have received higher returns in previous tax years had gay marriage been legalized earlier, the IRS has granted the opportunity to allow same sex partners to file either original or amended returns up to three years from the date of last return filed or two years from the date you paid your tax, whichever is later. Form 1040X is for income tax refunds and Form 843 is for refund claims for gift or estate taxes.
There is a potential downside to amending these tax returns, as there are the possibilities of increased total tax due as well as a higher probability of an audit. It’s best to seek help from a tax professional to determine the impact before filing any claims.
Your marriage may affect more than just income taxes
Benefits of marriage include shared assets, including money, possessions and property, since you’ll no longer be a legal stranger for federal estate purposes. If your spouse dies, you will have an additional tax benefit known as portability, which you are entitled up to $5.43 million in federal estate tax exemption. This can be utilized throughout your lifetime. Gift taxes are also no longer an issue as there is an “unlimited marital deduction for gifts between spouses.”
For more information on marriage taxes, visit the IRS website or consult with a financial planner.
This article is brought to you by our guest writer, Tom Sommers
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