WSJ: Same-Sex Couples in CA, NV & WA Reap Big Federal Tax Bonuses

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    Feb 21, 2011 6:50 PM GMT
    http://online.wsj.com/article/SB10001424052748703561604576150332819819692.html

    Thanks to a 1996 federal law aimed at preserving traditional marriage, thousands of same-sex couples in California, Nevada, and Washington state could get big tax bonuses on their federal returns starting this year. The bonuses are off-limits to heterosexual married couples—a sharp reminder of the "marriage penalty" that often dings two-earner couples. ...

    All three states recognize domestic partnerships and also have what is known as community-property law. Community property refers to a system of ownership in nine states that usually attributes income and property acquired during marriage equally to both partners, regardless of who earned it. (The nine states are Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas, Washington and Wisconsin.)

    The three states also now apply community-property laws to registered domestic partners. So the IRS—which must follow state property laws—has ruled that these couples should figure their total community income and split it down the middle, starting in 2010.

    That is where the benefit comes in. Although domestic partners must divide their income equally, the federal Defense of Marriage Act prevents the IRS from treating these couples as married joint filers. So for 2010 and after, each partner will claim half the community income but still file as single or head of household.

    The result, in many cases, is a federal tax savings because a couple will avoid the marriage penalty that often raises taxes for two-earner heterosexual married couples.
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    Feb 21, 2011 6:54 PM GMT

    "Although domestic partners must divide their income equally, the federal Defense of Marriage Act prevents the IRS from treating these couples as married joint filers."


    lol, it makes for a good argument to get rid of DOMA.
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    Feb 21, 2011 7:21 PM GMT
    Taxes based upon one's marital staus should be done away with.

    Each person should be taxed according to the bracket appropriate to his or her earning level.

    If that means a "marriage penalty", so be it.
  • tongun18

    Posts: 593

    Feb 22, 2011 7:24 PM GMT
    That's hilarious! icon_lol.gif And a testament to the law of unintended consequences.