Tax Saving Tips for Married Gay Couples
Same sex couples legally married under Massachusetts law must file as individuals for Federal tax purposes. This also applies to heterosexual couples who are not legally married but share a household or have joint custody of children.
Couples often divide expenses equally, but this may be a mistake when filing Federal taxes, especially if it results in both of you taking the standard deduction (for tax year 2010, $5800), when one of you could be itemizing.
- Medical Expenses
Often, medical expenses fall below the 7.5% income threshhold and are not deductible. However, if you credit as many medical expenses as you can to one person, they may be high enough to be deducted. The cost of family health insurance, joint counseling, or children's medical copays and prescription costs may be able to go on either tax return; put them where they give the greatest tax savings. - Real Estate Taxes
If your home is in both names, you may want to deduct all real estate taxes on one return, rather than dividing them equally.
Note that the Schedule L deduction to take up to $500 in real estate taxes without itemizing was discontinued for tax year 2010. - Mortgage and Home Equity Loan Interest
Do the same thing with any deductible interest. - Charitable Deductions
If gifts to charity were made out of a joint account, include them on the tax return of the person who is itemizing. - Exemptions for Dependents
If your incomes are significantly different, you may realize additional tax benefits by taking all exemptions for dependents on the lower income tax return, especially if it qualifies that person for other tax breaks like the Retirement Savings Contribution Credit, which can be up to $1,000, or the Earned Income Credit. Note that for the sake of consistency, medical co-pays for that dependant (but not necessarily family health insurance) may need to be included on the same tax return as the exemption.
You may need to play some "what if" scenarios to get the best results. For example, if your incomes are significantly different and the higher-income person could go into a lower tax bracket by itemizing, that may result in less taxes overall than if the lower-income person takes all deductions, even if the total deductions (because of income-based threshholds) would be higher for them.
As always, discuss this or any other tax strategy with your accountant.
