Tax planning for same sex couples

In 2013 the Supreme Court ruled on a case that effectively put same-sex couples on equal tax and financial footing with other couples. I summarized the financial planning impact in this June 27 2013 blog post. Five significant financial planning effects of the legal change were:

1) transfer of property to a spouse during one’s lifetime is now allowed without owing federal gift tax.
2) ability to receive property from a deceased spouse without paying federal estate tax.
3) can now file federal taxes jointly.
4) eligible to receive a spouse’s Social Security benefits.
5) now eligible to receive pension survivorship benefits.

Other information is available in my older article “Financial Planning Checklist for Unmarried Couples“.

The final impact of the long push for equal rights and recognition for same-sex couples that the latest impact is paying higher income taxes as explained in this article by Dave Yoshida. The so-called “marriage penalty” now applies to increase the combined taxes of some couples. The only effective way to address this effect is to incorporate income tax planning strategies into the overall financial planning process. Today’s tax planning software tools allow us to easily compare the estimated total tax liability for people filing jointly vs. filing separately – either married or single, and this would be the same for same sex couples. This service allows us to compare a number of “what if” scenarios to test tax planning strategies. The service is available both to those who have their tax returns prepared as well as those who file their own taxes.

The process of tax planning is a separate from year-end tax return preparation. Now, in the middle of the year, is the best time to tackle tax planning. I would welcome the opportunity to schedule time to tackle income tax planning.

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