Here are some ways in which LGBTQ families are penalized by taxes
- Our domestic partner benefits are considered ‘income” and subject to municipal, state and federal taxes, typically about $1,000 a year for the average plan. Cities and states have the option to eliminate this unfair taxation through ordinances and legislation. They can also offer what is known as a “tax offset” to their own employees to offset the federal tax (which won’t be eliminated under marriage is recognized federally.) This basically means my family pays $1,000 more a year in taxes to have health insurance than a married household. Unfair.
- “The inheritance tax can be particularly problematic for couples who share ownership of a house. Half of the house would be considered an asset of the decreased partner, and the remaining partner would have to shell out 15 percent of half the house’s value in cash, which could necessitate the sale of the house if there aren’t a lot of liquid assets available.” From Lawyers.com This inheritance tax is on everything (the estate tax is on estates over $5 million – a separate tax.) While there are ways to try to get around this, the simple fact is that we have to resort to legal maneuvers to simply share assets and avoid a brutal tax in the case of a death (especially unanticipated.)
- Here’s a convoluted story a gay couple had to go through simply to ship a vehicle to Mexico when one of them was transferred there. Shipping taxes because of how the car was registered. Something you probably don’t think twice about.
- The New York Times details other examples – the federal Earned Income Tax Credit only “counts” for one parent because you can’t file jointly even if you are married. The same is true for adoption credits or foster parent credits. So much for supporting children. Unfair.
Again, a lot of these can be worked around if you have the resources to hire an attorney and you are in fact aware that these problems exist. Many LGBTQ families don’t realize this.
The problems can also be addressed by legislation. Yes, the aldermen in Chicago and the councilman in Boston and the Mayor of Pittsburgh cannot address federal marriage equality issues. Then CAN offer tax offsets, eliminate local taxes and provide education to their LGBTQ residents (and unmarried heterosexual couples, too.) For most of us, saving $1,000 a year in a domestic partner penalty tax would be terrific.