Same-Sex Spouses Hit By Tax Inequality

Married same-sex couples can face higher federal tax bills of up to $6,000 because the federal government, due to the Defense of Marriage Act (DOMA), does not recognize their unions, an analysis conducted by tax specialists has found.

Marriage can provide several tax breaks for heterosexual couples but due to DOMA’s restrictions same-sex couples cannot file joint returns. This can have a big impact.

CNNMoney, working with H&R Block, has been crunching the numbers to compare same-sex and heterosexual parent families through a variety of scenarios. One scenario calculated the loss if one spouse was earning $100,000 with the other spouse staying at home with the family’s two children.

In the same-sex family’s case they cannot file jointly for federal purposes, therefore must use other options. In this scenario the working spouse files as “head of household,” while the stay-at-home spouse is then considered as a “qualifying relative.”

The breakdown of the disparity the married same-sex couple would face compared to a heterosexual married couple is stark. More from CNN Money:

Say that couple reported no other income or deductions. In that case, the same-sex household’s federal tax bill is $15,199, which includes tax the head of household must pay on health insurance premiums to cover the stay-at-home spouse. That’s $4,543 higher than the straight couple’s liability.

Why? Because the “head of household” designation comes with some disadvantages.

Filing as “head of household” instead of “married filing jointly” exposes more income to a higher tax bracket. Plus, standard deductions, which are given based on the filing status to taxpayers who don’t itemize deductions, are lower for a head of household than they are for married couples filing jointly.

And then there are the kids. When a child tax credit is claimed, the gap between same-sex households and married couples can grow even wider.

The heterosexual couple in H&R Block’s example is able to claim the full $1,000 child tax credit for each kid. But the credit phases out sooner for families claiming “head of household.” So in this case, the cost of being unable to file jointly comes out to $6,043 for same-sex households.

While same-sex couples can benefit where the so-called marriage penalty is concerned, an overall comparison factoring in that benefit still favors married heterosexual couples.

The analysis goes on to note that it is not just income taxes where married same-sex couples loose out and have to pay more because of the restrictions created by the federal Defense of Marriage Act.

Other issues arise from many same-sex spouses not being able to claim marital exemptions in inheritance taxes and gift taxes, while same-sex families may face lower tax exclusions on transactions like the sale of a home.

While the above example may not be typical of everyone’s circumstance it serves to illustrate the financial and emotional hardships DOMA imposes on same-sex couples.

Photo used under the MorgueFile user license, with thanks to pennywise.

Disclaimer: The views expressed above are solely those of the author and may not reflect those of
Care2, Inc., its employees or advertisers.

Linda M.

12:13PM PST on Dec 31, 2011

Single people have ALWAYS been discriminated against and still are yet nobody worries about that! Higher taxes, car insurance, housing discrimination, you name it! When I bought property to build my home, the bank wanted my father to co-sign. At that time I was gainfully employed, in my thirties, had a stellar credit raring, no other debts and made more money than both of my parents combined but ...I DIDN'T HAVE ME A MAN! What a crock of shit!!! The bank loan person, a woman I might add, even asked if my parents might die soon and leave me some money!!! I went to several banks until I found one that would let me get the loan on my own. Want to talk about discrimination?

send a green star

10:48AM PST on Dec 31, 2011

I'm with Wes on this one. If you want to talk about discrimination, try being single. Taxes, insurance, everything costs more. What are we, some kind of rejects? I've put up with this discrimination crap all my life!!!!

Tammy K.

8:51PM PST on Dec 30, 2011

End the discrimination now!

Tracey D.

6:52PM PST on Dec 30, 2011

signed the petition. DOMA needs to go.

John M.

7:44AM PST on Dec 30, 2011

Thank you for the article...

Norma V.

11:48PM PST on Dec 29, 2011

Another opportunity for us to get over the homophobia and end discrimination.....let's head that way for 2012.

Past Member .

6:59PM PST on Dec 29, 2011

Giving married people a tax break is discrimination against single people.

Sandra L.

3:26PM PST on Dec 29, 2011

Seriously, 'head of household'? We are a democracy in our household, paycheque notwithstanding.

Joe R.

3:11PM PST on Dec 28, 2011

Now I remember why I feel like a 2nd class citizen!!!

Terry T.

1:41PM PST on Dec 28, 2011

Ginger S thinking that same sex couples should not use the word "marriage" isn't "moderate", it's DISCRIMINATION. That's the EXACT SAME as having separate water fountains and Segregated schools.