"Married (heterosexual) couples never have to think about that, but same-sex couples get trapped in this all the time," Salandra says.
Present law allows you to exclude up to $5 million over your lifetime, but that exclusion will drop to $1 million in 2013 if Congress doesn't act. You can use your entire exclusion if you add your spouse's name to a real estate title or jointly purchase other high-value assets.
Even if you haven't hit your lifetime exclusion, you must still file a federal gift tax return if you give more than $13,000 to one person in a year. A gift of $113,000 to your same-sex spouse, for example, would require you to file a return reporting the gift of $100,000 and invoking your exemption.
Despite the hassles, the current law offers opportunities. "The high gifting exclusion can offer tremendous benefits to same-sex couples who may want to add their partners to the title of appreciating assets, or simply make cash gifts to a partner," Hartmann says.
3. Getting the tax prep blues
Same-sex couples could face triple the fee heterosexuals pay for tax preparation, Hartmann says. That's because tax preparers may have to create four returns:
- Two returns: one for each spouse filing as single with the IRS.
- One return to file jointly with your home state.
- One hypothetical joint federal return, which is needed to prepare the joint state return.
Even bigger bills may go to some same-sex couples in California, Nevada or Washington. A new IRS rule allows registered domestic partners and legally married same-sex couples in those community property states to split their income. This may provide tax advantages or produce new liabilities.
All of this complicates tax preparation. "It's critical for every couple to recognize the potential issues and to seek the right advice," Hartmann says.
To avoid unexpected costs, pay attention and plan ahead, tax preparers advise.
"It is starting to be impossible for the average person to keep up with tax law," Salandra says, "but same-sex couples, in particular, can benefit more from being aware of tax laws than the average taxpayer."
« Back to the Tax Guide main page.
Create a news alert for "taxes"