This time of year, news outlets are eager to run stories about the tax plight of same-sex married couples. These stories tend to focus on same-sex couples always paying more in taxes because they can’t file joint tax returns. But I think that is the wrong focus.
Reporters sometimes call me for my insight about same-sex marriage and taxes. I always say that we shouldn’t look at the bottom-line numbers on a Form 1040 when looking at the tax problems same-sex couples face. Instead, we should look at the blatant, systemic discrimination same-sex couples face because of the Defense of Marriage Act (DOMA).
If we look at bottom-line numbers on a Form 1040, some same-sex married couples would benefit from being able to file a joint return. But some benefit from being considered single.
This is true for opposite-sex couples who get married — historically, about 50% will actually pay more in taxes by getting married. This is known as the “marriage penalty.” This will be true for same-sex couples someday when the Defense of Marriage Act goes away.
The tax discrimination is much deeper than “some people pay more in taxes”. Instead, I prefer to point out the following:
Because of DOMA, same-sex married couples must lead dual tax lives. For federal tax purposes, they must follow federal tax law as it applies to single people. Then they have to recalculate everything according to federal tax law as it applies to married people so they can file their state taxes. These are hoops that opposite-sex married couples don’t have to jump through.
Same-sex married couples face being taxed on health insurance — something opposite-sex married couples don’t have to worry about.
Same-sex married couples can face problems in complying with gift tax law — something opposite-sex married couples don’t have to worry about.
Same-sex married couples face limitations on passing retirement accounts to a surviving spouse when one spouse dies — something opposite-sex married couples don’t have to worry about.
Same-sex married couples also don’t get the favorable estate-tax treatment that opposite-sex couples get.
Even though being married doesn’t always result in tax savings on the bottom-line of the 1040, there is a certain convenience factor involved with filing a joint return. There’s also a cost savings in preparing and filing a joint return rather than the convoluted process same-sex couples have to go through.
And then there’s the psychological and emotional discrimination of being told you’re not married for federal purposes, even though you have a legally valid marriage under state law to someone you love.