Tax Day: A Time to Remember Discrimination Gays and Lesbians Face
Today is Tax Day in the US. Whether you procrastinated or filed early, tax season is ripe with opportunities to be reminded how we, as gays and lesbians are second class citizens in the eyes of the law. Bottom line – we pay more than our straight counterparts. In my opinion, this alone is a reason for supporting gay marriage (or at least some legal equivalent).
I was shocked and pleased to see that CNN brought this very disparity to light this week in their article “Gay Couples Face Higher Tax Bills”:
Most states ban gay marriage and 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 — and potentially save 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 defines marriage as being allowed only between a man and a woman.
“You’re running one household,” said John Traier, a partner in the Butler, New Jersey, accounting firm Hammond & Traier. “But the federal government and a lot of states treat them as two households.”
When it comes to tax time the issues are plentiful. CNN points out two of the most significant:
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, Indiana, 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.
As with many other discrepancies and discrimination gays and lesbians face, adding children to the mix simply complicates things further.
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.”
I don’t know about you but just filing taxes is bad enough but considering all these points in black and white is downright depressing. If you feel like you can’t get ahead, chock up at least a portion of the added challenge to the additional expenses gays and lesbian couples (and families) face.
Of course since today is tax day the focus is on taxes. Yet, there is more to this financial discrepancy than what CNN points out. What about all the added taxes a same-sex person has to pay when when his or her partner dies? When asked on vacation last week why I am even buying life insurance, I replied “Basically so my partner can cover inheritance taxes if I were to die.” Now that really gets my riled up!
In last week’s Ten Money Questions Candace Gingrich put this problem pretty darn succinctly:
In many ways it is the invisible discriminator when it comes to GLBT equality. When I am asked whether or not I’ve ever been discriminated against, my answer includes the often unnoticed ways that we are affected financially: paying federal taxes on domestic partner benefits; the income gap between queer and straight people; paying for lawyers and documents to protect our families; etc. There is also the damage that the myth of GLBT affluence does to efforts to secure GLBT equality.
So next time someone complains to you that “you gays just want special rights”, send them a copy of this post. Perhaps a little dollars and cents will help knock a little sense into those who are missing the hard and fast financial facts of being gay or lesbian.
Interesting, when I got married, my tax bill took a huge jump, the ‘marriage penalty’ they called it. Maybe they fixed it for opposite gender marriages.
I do look forward to the day when there’s equality, for this, and other issues. I work for a company (Fortune 500 co) which provides health care and spousal benefits for same sex partners who declare they are in a ‘permanent’ relationship. That’s a start. Maybe the IRS code will soon follow.
Joe
Paula: Bravo! Thanks for covering this important topic.
Here are a couple of other posts from the archives if readers are looking for additional information.
Not Quite Freedom for All When It Comes to Same-Sex Marriage
Straight Partnerships: Saying No to Marriage
Separate but equal?
Marriage Equality: LGBT Advice
Big Love, Alimony and Same-Sex Marriage
Out of all the arguments brought by the gay community this one is by far the most beneficial. I never thought about tax laws when it came to gay & les equal rights. This should really help you out. The IRS will only change the tax laws if a bill was past into law to change them. (The IRS doesn’t make the tax laws). I wouldn’t be surprised if something came up soon to change it all. Look at who is running for president. Hopefully we will get our first black or our first women president.