Same-Sex Marriage? Watch Those Taxes

~ Herb White, MBA, CFP ~

Equal marriage benefits for every couple – state tax breaks – new Roth conversion strategies – there are a number of benefits that come with same-sex marriages now, but also some important issues. Let’s take a look at what might affect you if you are in a same-sex marriage.

Tax Issues to Consider
With the new ruling by the Supreme Court, tax filing in states that didn’t previously recognize same-sex marriages will now be simplified. But that doesn’t mean everything gets simpler! The ruling may change the amount of taxes you owe. Are you aware that if you both earn about the same income, especially if you are high-earning professionals, you could face a marriage penalty when your incomes are combined, since you are now in a higher tax bracket?

For example, let’s say you got married this year and plan to file jointly. If you both earned $300,000 annually but previously filed separately, you were in the 33% tax bracket. Now, filing jointly, those incomes become one – $600,000 – and your tax bracket may bump up to 39.6%.

In addition, if you were married prior to the Supreme Court ruling, and your state didn’t previously recognize same-sex unions, you face a number of other income tax issues for filing this year, and these issues may apply to federal and state returns.

For example, in some states, even though married, you previously may have been required to file state tax returns as if you were single. This was true, even though as a married couple you were required to file joint or married-but-separate federal returns from 2013 onward. What should you do?

Consider the fact that if you file an amended state return for those prior years, you could reduce your state taxes retroactively; however, filing amended returns could also increase your prior year federal taxes. Check with a tax advisor on this important issue before filing and weigh the ramifications of these amended filings.

Also consider that filing retroactively could change the amounts used to ascertain your eligibility for a number of tax deductions and credits you may have claimed in those years. Be sure to ask about this as well.

What other financial issues might affect you?
If you find you are going to have withholding penalties, consider revising your 2015 Form W-4 to decrease the number of personal allowances.

Also, remember that if you are legally married on the last day of tax year 2015, you generally must use the “married” status when the time comes to file your 2015 tax return. As your advisor.

You should also talk with your financial and/or tax professional if any of these issues apply:

  • If you currently have a Roth account, you will want to ask about the best steps to convert it over.
  • If you have children who are in college, is there financial aid that needs to be addressed?
  • How about a health savings account? The contributions will be affected.
  • Other employee benefits, no matter how small, may be affected. Be sure to ask about these.
  • Ask about how filing both federal and state taxes jointly now may offer state-level tax breaks.

Your financial planning for the years ahead as a couple
Knowing how to handle the tax issues that may change now that you are a couple is one thing. Planning for your life together, in light of tax and other financial issues, is another. Doing this planning together, with the help of a financial advisor, is perhaps the most important financial step you can take.

Herb White

Herb White

Tune in to “America’s Wealth Management Show” sponsored locally
by Life Certain Wealth Strategies
Saturdays from 12 noon to 1 p.m. on news radio 630 KHOW.
Provided by courtesy of Herb White, MBA, CFP©, a CERTIFIED FINANCIAL PLANNERª with Life Certain Wealth Strategies, 8400 E Prentice Ave, #715 Greenwood Village, Colorado, www.lifecertain.com, (303) 793-3999. Securities and investment advisory services offered through Woodbury Financial Services, Inc. Member FINRA, SIPC and Registered Investment Advisor. Life Certain Wealth Strategies and Woodbury Financial Services are not affiliated entities.
Although the information has been gathered from sources believed to be reliable, it cannot be guaranteed. Federal tax laws are complex and subject to change. This information is not intended to be a substitute for specific individualized tax or legal advice. Neither Woodbury Financial Services, Inc., nor its registered representatives, offer tax or legal advice. As with all matters of a tax or legal nature, you should consult with your tax or legal counsel for advice.


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