The U.S. tax system is downright confusing. If you are a same-sex couple, it can be even more complicated.
With same-sex marriage becoming legally recognized (by all 50 states) in 2015, many tax and financial advisors are still getting up to speed on tax-saving strategies and loopholes. Whether you’re newly married or have been domestic partners for years, it is important to be aware of all your options.
Here are some creative ways to reduce your tax bill:
File As Married Filing Jointly
A common misconception is that getting married is bad for taxes. For most people, there is actually a significant tax benefit to filing taxes jointly with your partner.
For couples who are married, income tax brackets are generally more favorable and tax deductions and credits are larger. Married couples should consider filing as married filing jointly before filing as separate.
File As Registered Domestic Partners Filing Jointly
As of now, there are 11 states that do not recognize same-sex marriage for tax purposes. This means that couples will need to file as Single.
However, California couples can still take advantage of filing taxes jointly if they are Registered Domestic Partners. Since tax rates are more favorable for married couples, this can be advantageous and lower your tax bill. To do this, you will still need to file your Federal tax returns as Single, but you will file your California tax returns as Married Filing Jointly.
File Amendments For The Previous Four Years
Being that the majority of tax preparers are aged 50 and over, it’s no surprise that they are not up to date on recent tax law changes and loopholes. Because of this, many same-sex couples have unknowingly missed out on the Registered Domestic Partner filing status for their California taxes.
If this sounds like you, there is still hope. The California Franchise Tax Board allows you to file amendments for your previous four tax years. Same-sex couples that are Registered Domestic Partners can amend their tax returns to file as Married Filing Jointly.
Staying up-to-date with recent tax law changes is crucial to optimizing your finances and lowering your tax bill. If you would like to work with a financial planner to walk you through your options, I would love to help you!
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Disclaimer: This blog is for informational purposes only, and should not be considered advice or recommendations. All opinions expressed herein are solely those of Amaral Financial Planning, LLC, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made to another parties’ informational accuracy or completeness. You should consult your financial advisor, tax professional or legal counsel prior to implementation.