Many same-sex couples in several states are getting a tax break this year from the IRS, according to new requirements to report their combined income on federal tax returns.
Under so-called "income splitting," the IRS is requiring all same-sex married couples or registered domestic partners to divide their combined income equally and report it on their separate tax returns.
The IRS ruling applies in only three states - California, Nevada and Washington - that have community property laws and that recognize married same-sex couples and registered domestic partners.
For some couples, it will mean more money in their 2010 refund; for others, they'll pay more in taxes.
Either way, the change is significant, both monetarily and emotionally, officials of Lambda Legal, the national gay and lesbian legal rights group, said Tuesday in a conference call with reporters.
Peter Renn, a Los Angeles-based Lambda attorney, hailed the IRS requirement as a money-saver for many same-sex couples, as well as another step to "move the ball forward" in recognizing their rights.
Those who will save the most are same-sex couples with the biggest disparities in income. For instance, if one partner earns $100,000 and the other is a stay-at-home spouse with little or no income, they'll split their combined community earnings on their individual tax returns, with each reporting $50,000 in income. The result: an overall lower tax bill for both.
As an example, Lambda officials cited the hypothetical couple of "David," an attorney earning $225,000, and "Richard," a librarian with $20,000 in income. They'd have combined tax savings of $6,824.
In California, same-sex couples who are registered domestic partners or were legally married after June 16, 2008, and before Nov. 5, 2008, are considered to share community property and can file their state taxes as "married," filing either jointly or separately with the state Franchise Tax Board. The same is true of registered partners who are heterosexual couples.
The IRS change brings the federal tax return a step closer to those filed by same-sex couples in community-property states.
"This is what we usually do: recognize state community property laws on the federal level," said IRS spokesman Jesse Weller. He said the IRS recently posted revised rules online for IRS Publication 555 ("Community Property") to include the new same-sex community income language. Paper copies are not yet available.
For 2010 taxes dues this April, the "income splitting" is mandatory. Same-sex couples also have the option of filing an amended return for tax years 2007-2009, if they think they might qualify for a refund.
But the new rules are not easy. Because the federal government doesn't recognize same-sex marriages, those couples cannot file jointly for their IRS taxes but must file two separate returns, either as a single or head of household.
(Contact Claudia Buck at cbuck(at)sacbee.com.)
(Distributed by Scripps Howard News Service, www.scrippsnews.com.)