For gay couples,
the April 15 tax filing deadline can be a reminder of
the disparities they face, even in a nation that is becoming
more accepting of same-sex couples.
Gay couples often
pay higher taxes because they don't get the federal tax
benefits that go with marriage. And for couples in
state-sanctioned domestic partnerships, civil unions,
or same-sex marriages, filing federal income taxes can
involve doing three sets of paperwork instead of one.
''It's a
significant financial disability,'' said Beth Asaro, who
last year entered into one of New Jersey's first
legally recognized civil unions.
While the debate
over government recognition of gay marriage is a
political hot-button with arguments about morality, civil
rights, and tradition, the tax issue is a mostly
practical one for thousands of same-sex couples.
Most states don't
recognize same-sex unions in any way. Only in
Massachusetts can gay couples legally marry. Since 1997,
nine other states and Washington D.C. started offering
civil unions or domestic partnerships that give some
or all the legal protections of marriage.
Those protections
include allowing gay couples to file state taxes
jointly -- potentially saving them money. But they can also
make tax filing more complicated for the couples.
That's because
the state protections do not help with federal taxes.
Under the 1996 Defense of Marriage Act, the government
recognizes marriage only between a man and a woman.
''You're running
one household,'' said John Traier, a partner in the
Butler, N.J., accounting firm Hammond & Traier. ''But
the federal government and a lot of states treat them
as two households.''
The same is true
for unmarried straight couples who are living together.
There are two
main effects of the different treatment under federal law.
One is the tax
rate. Take two couples where one partner has a taxable
income of $20,000 and the other makes $40,000. If they can
file their federal taxes jointly, the tax bill would
be $8,217.50. Filing separately, the combined bill
would be $9,032.50 -- more than $800 higher.
Another disparity
comes with the federal government's treatment of
employer-provided health insurance, which also affects
unmarried heterosexual couples.
For example, Dan
Jessup is a project manager at JPMorgan Chase in
Indiana. His partner, Bob Chenoweth, is self-employed,
running two businesses out of the couple's
Mooresville, Ind., home. So Chenoweth gets health
insurance through Chase.
But Jessup is
required to count the company's cost of his partner's
benefits as additional income for tax purposes.
State and federal
taxes on those benefits cost about $1,800 per year,
Jessup said.
''I certainly
think about it every payday,'' when the extra withholding
is taken from his paycheck, he said. ''If you think about 10
years, $18,000 is a lot of money. That could buy me a
pretty nice car.''
The tax on
benefits for domestic partners also applies to employers.
Companies including Chase are endorsing the Human Rights
Campaign's push for a bill that would end the tax on
health plan benefits for people who are neither the
spouse nor legal dependent of the employee. Versions of
the bill have been introduced in Congress in the last three
sessions, but have never moved out of committee.
A government
analysis estimated the bill would cost about $10 billion in
lost federal tax revenue over 10 years. Advocates for the
bill say it would create savings elsewhere, including
reducing the Medicaid rolls.
Ryan Ellis, the
tax policy director for Americans for Tax Reform, said
his group supports the concept, but not the specific
language of the bill, because it does not propose
increasing how much domestic partners could put into
health savings accounts.
It's not just the
higher bills that can be frustrating for same-sex
taxpayers; it's also the process of filing taxes,
particularly in states that offer some joint benefits
to gay couples.
''I don't want to
say it's chaotic, but it's very difficult for a lot of
reasons,'' said Traier, the accountant who is in a civil
union partnership himself.
In New Jersey and
the other states where same-sex unions are formally
recognized, couples can file their state taxes jointly, but
they must file their federal tax returns as
individuals.
That means doing
income calculations twice. Many tax programs such as
Intuit's TurboTax are set up to deal with that extra math.
But there are
other issues even up-to-date software might not solve.
These issues also
affect unmarried straight couples.
For instance,
couples with children must decide which partner gets to
claim them as dependents for tax purposes on federal returns
and returns in states that don't recognize same-sex
unions. Similarly, couples who own homes together have
to sort out how much of the mortgage interest payments
each partner gets to use as a deduction, said Lara Schwartz,
the Human Rights Campaign legal director.
''If you are not
a different sex'' from your partner, Schwartz said,
''you are strangers, basically, under federal
law.'' (Geoff Mulvihill, AP)
