The good news for many gay and lesbian couples: A growing number of states allow them to file joint state income tax returns. The other good news: The federal government now allows married same sex couples to file joint federal income tax returns. However, for un-married couples, the federal government and the states can have starkly different rules, which can make taking advantage of domestic partnership arrangements difficult at tax time. Here’s help to guide you through the nuances of filing as a couple - and finding the method that offers you the best tax advantages.
If you are married under state law then your marriage is recognized under federal law for tax filing purposes. This is true even if you are domiciled in a state that doesn't recognize your marriage. In this case, you can file a joint federal tax return and a single filing status state tax return.
In states where same sex couples can marry and in the those that recognize civil unions or registered domestic partners, qualifying couples can file joint state income tax returns. However, only married couples can file jointly at the federal level.
In California, certain unmarried heterosexual couples who live together can also register as domestic partners and file joint state tax returns. To qualify, one of the partners must be at least age 62. Filing a federal joint return with the IRS is prohibited for them as well.
These differing laws can create complicated tax filing situations:
- Married and domiciled in a state that recognizes your marriage - married filing for federal and state.
- Married and not domiciled in a state that recognizes your marriage - married filing for federal but not for state.
- Recognized domestic partners in the state - single filing for federal but married filing for state.
- Unrecognized domestic partners in the state - single filing for federal and state.
Federal laws come into play when filing your state tax returns. Most states base their joint return computations on the figures from your joint federal return. This means that while married couples only have to file two returns - one for federal and one for state - generally, unmarried domestic partners must complete a total of four tax returns.
- First, each partner must complete an individual federal tax return to file with the IRS.
- Second, the couple must create a mock or dummy joint federal return combining income, adjustments, deductions and credits.
- Finally, they use that mock return as the jumping off point to prepare a joint state tax return.