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Same-Sex Couples In Certain States May Get A Tax Break From Democrats’ $1.75 Trillion Social Plan

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Dec 20, 2021

Many think that the LGBTQ Community has obtained many rights and freedoms over the years, which is true to some extent, but the LGBTQ Community is still fighting for rights many years after the historic Stone Wall Riots.  However, the LGBTQ Community faces current threats in the form of legislation and discrimination and in many instances violent hate crimes across our nation.  

This article highlights proposed changes to federal tax law, which would allow some same sex couples to file amended returns to obtain tax refunds.  Some supporters argue the change would correct inequality in existing tax laws.  There is a little provision in the President’s current plan to expand the nation’s social safety net, which could mean a tax break for some same sex couples.  

To understand the history, in the case of United States v Windsor, the Supreme Court struck down parts of DOMA, the (Defense of Marriage Act) in 2013.  This came about as a result of an estate tax issue for a couple who was legally married in Canada, but when one of the parties died in the United States, the United States government refused to honor the marriage exemption for estate tax purposes.  Following the Windsor case, the IRS issued guidelines that permitted taxpayers to amend their tax returns with respect to their marital status, but only permitted that generally back to 2010.  The recently proposed legislations by the Democrats for the $1.7 trillion Social and Climate Spending Plan, the latest alliteration of the Build Back Better Act, will let tax payers who were legally married under state law before 2010 to claim federal tax benefits that are unavailable under current rules. Therefore, couples could file amended tax returns for years as early as 2004 by amending and filing joint federal returns as a married couple and claiming refunds and credits that may result in a net tax benefit.  This could be significant for some couples.

Massachusetts became the first state to legalize same sex marriage in 2003.  There were only four other states, Connecticut, Iowa, New Hampshire and Vermont, plus Washington D.C., that legalized same sex marriage before 2010.  Although tax rights were available to same sex couples, nationally recognized legalized same sex marriages did not occur until 2015 in Obergefell v Hodges.

As expressed in this article, not all same sex couples would benefit from filing jointly as opposed to filing single as single tax payers.  There are some marriage penalties that do not actually give a tax break or benefit.  Usually the biggest benefit is when one spouse is the higher earner or the other spouse has little or no income.  Before this becomes a reality for anyone, it has to become law!

I would suggest consulting an accountant to see whether the tax benefit of filing these amended returns greatly outweigh any cost incurred in the filing of these amended returns.  Otherwise, it may not make sense to do it.

Selected excerpt(s) and linked article courtesy of Greg Iacurci, CNBC (dot) com
Royalty-free photo courtesy of UnSplash

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