- Days left

Court's Marriage Ruling Could Save Same-Sex Couples Big Money

A same-sex marriage supporter waves a rainbow flag in front of the US Supreme Court on March 26, 2013 in Washington, DC, as the Court takes up the issue of gay marriage. The US Supreme Court on Tuesday heard arguments on the emotionally charged issue of gay marriage as it considers arguments that it should make history and extend equal rights to same-sex couples. Waving US and rainbow flags, hundreds of gay marriage supporters braved the cold to rally outside the court along with a smaller group of opponents, some pushing strollers. Some slept outside in hopes of witnessing the historic hearing. AFP PHOTO / Saul LOEB        (Photo credit should read SAUL LOEB/AFP/Getty Images)
Saul Loeb/AFP/Getty ImagesA same-sex marriage supporter waves a rainbow flag in front of the US Supreme Court on March 26, 2013 in Washington, DC, as the Court takes up the issue of gay marriage. Waving US and rainbow flags, hundreds of gay marriage supporters braved the cold to rally outside the court along with a smaller group of opponents, some pushing strollers. Some slept outside in hopes of witnessing the historic hearing.
By Blake Ellis

Should the Supreme Court overturn a federal law that defines marriage as solely between a man and a woman, some married same-sex couples will save $8,000 or more in income tax, a new analysis finds.

This week, the court will hear a case challenging the Defense of Marriage Act, a 1996 law that prevents same-sex couples from receiving more than 1,000 federal benefits that opposite-sex married couples receive.

This includes the right to file federal taxes jointly -- which, depending on income, gives some married filers a "bonus" of thousands of dollars, while penalizing others.

A same-sex couple with combined income of $100,000, in which one person earns $70,000 and the other makes $30,000, currently pays an extra $1,625 a year by filing separately rather than jointly, according to an analysis H&R Block conducted for CNNMoney. The calculations assume a standard deduction, no children and no tax credits.

The extra tax liability jumps to nearly $8,000 when one spouse earns all $100,000 and the other reports no income. In this case, couples filing jointly owe tax of $11,858, while a same-sex couple filing separately owes $19,585 -- a 65 percent difference.

Cutting Tax Liability in Half

"[There's] a myth that any time married people file jointly they are worse off than filing singly, and that's just not correct at all -- sometimes they get a marriage bonus," said Jackie Perlman, a principal analyst at H&R Block Inc. (HRB).

That's because filing jointly merges the two incomes, shifting some of the higher-earning spouse's income into a lower tax bracket. In some scenarios, couples would even cut their tax bills in half by filing jointly -- typically when incomes are low, Perlman said.

As the gap between incomes shrinks, however, the difference in tax liability is less pronounced. In H&R Block's scenario, no extra tax is owed when each spouse earns an income of $50,000 and they file jointly instead of individually.

Other couples would end up owing more by filing jointly, especially if they miss out on deductions or credits like the Earned Income Tax Credit and the Child Tax Credit because, when combined, their income is no longer low enough to qualify or receive the full benefit.


Another major tax issue at stake in the DOMA case is the estate tax. Currently, surviving spouses in federally-recognized marriages don't have to pay taxes on their deceased spouse's estate, while same-sex widows pay a 35 percent estate tax on anything in excess of a $5 million exemption.

The case challenging DOMA was filed by New Yorker Edith Windsor, who sued to get back the $363,000 in estate taxes she paid when her partner of more than 40 years died.

Her arguments are being presented on Wednesday. Meanwhile, opposition to the law is growing -- with the Obama Administration, a coalition of big businesses and even a group of prominent Republicans all signing legal briefs in support of gay marriage.

If the court decides to overturn DOMA, it could significantly impact the financial lives of same-sex couples married at the state level. But it's up in the air whether federal benefits would be extended to domestic partnerships and civil unions. Currently, same-sex marriage is legal in nine states and Washington, D.C.

'Small Price to Pay'

In addition to not being able to file jointly and owing extra estate tax in certain cases, many same-sex couples owe tax on medical benefits received through a partner's employer-sponsored health insurance plan, are denied thousands of dollars in spousal Social Security benefits or don't qualify for survivors benefits if a spouse or partner passes away.

Mikey Rox and Earl Morrow, from New York City, would boost their refund by nearly $2,000 a year by filing jointly. And the $2,500 in tax they currently pay on the health insurance benefits Mikey receives from Earl's plan would vanish.

Some couples could even get refunded for the extra tax they paid in the past three years as well, if they file protective refund claims with the IRS and amend their returns to file jointly. Adele and Jennifer Hoppe-House, from Los Angeles, expect to get more than $13,000 back by doing this if DOMA is struck down.

Even for those who would owe more tax if they were allowed to file jointly, the extra money is often a small price to pay to see DOMA overturned.

"I'm sure more people are going to get financial wins than losses, whether it's taxes or Social Security," said Nanette Miller, head of the LGBT practice at accounting firm Marcum LLP. "But it's not just an economic issue -- it's that they want that equality."

More from CNNMoney

Learn about investing from the comfort of your own home.

Portfolio Basics

Take the first steps to building your portfolio.

View Course »

Investment Strategies

Learn the strategies you need to build a winning portfolio

View Course »

TurboTax Articles

Keeping Yourself Safe From Tax Scams Today

During tax time, there are numerous types of tax scams. These illegal schemes can result in the taxpayer being responsible for extra interest, penalties and possible criminal prosecution. Tax schemes and scams attempt to gain access to your financial information by email, telephone, fax or mail. They also may attempt to falsely collect tax you owe to the Internal Revenue Service. Using TurboTax ensures your financial information remains safe.

Health Care and Your Taxes: What's the Connection?

Your cost for Marketplace health insurance is based on the income you file on your tax return. Your reported income also determines your eligibility for the tax credits and penalties associated with Marketplace health coverage. Everyone has to have health insurance and by filing your taxes, you let the government know if you carry health insurance. The tax system acts as a way for the government to levy a penalty on those who don?t have it and to provide assistance, by means of a tax credit, to those who do.

Documents You Should Save for Tax Time

Settling your account with the Internal Revenue Service each year doesn?t need to be a frantic search for the information you need to file your tax return. Knowing what documents to have at your fingertips can help to reduce filing difficulties and possibly your tax bill.

Do The Math: Understanding Your Tax Refund

For most people, tax is collected by an employer at a rate that estimates your tax for the year. Your actual earnings and the deductions that you?re allowed to claim might cause you to pay too much tax, which leads the Internal Revenue Service to issue you a refund. "The idea behind a tax refund is quite simple," says James Windsor, a certified public accountant from Ann Arbor, Michigan. "When you pay more tax than you owe, the Internal Revenue Service returns the overpayment as your refund."

5 Tax Tips for Single Moms

If you?re a single mom filing your taxes, make use of tax credits and deductions that can help reduce your taxable income and reduce the amount of tax you pay. A number of strategies, credits and deductions can be used to reduce taxable income, and in some cases, allow tax refunds even if you didn?t pay in any taxes. When you use TurboTax, we?ll ask simple questions and handle these calculations for you.

Add a Comment

*0 / 3000 Character Maximum

5 Comments

Filter by:
petpetdon

The tax laws would need to be changed. The divorce laws would need to be changed. The mos really don't know what they are getting themselves into. Most of them don't want a committed relationship anyway. They are too busy, getting busy in the gay bars. With 10% of the population being gay the minority should never get what they think they want.

March 26 2013 at 3:20 PM Report abuse +2 rate up rate down Reply
2 replies to petpetdon's comment
clarita995

2 things-
we have minority rule
and the will of the people/they voted HOW MANY TIMES IN CALI ??? simply gets OVERTURNED by their judge--

so NOW if even ONE INDIVIDUAL doesn't LIKE SOMETHING--get a judge to change the LAWS
which in itself IS AND REMAINS UNCONSTITUTIONAL as the judicial branch is NOT THE LEGISLATIVE BRANCH......but this IS HOW IT GETS DONE.

March 26 2013 at 3:36 PM Report abuse +1 rate up rate down Reply
steveham13

ARE...YOU...FRIGGIN'...SERIOUS???

March 26 2013 at 5:21 PM Report abuse rate up rate down Reply
rforeverfree

and this is what all the pleas for 'equality" are about, the buck.

March 26 2013 at 2:33 PM Report abuse +1 rate up rate down Reply
1 reply to rforeverfree's comment
petpetdon

You are correct. It isn't about love or marriage. They just don't want to pay their fair share of their income taxes. They want their cake and to eat it too. In the land of the free and the home of the brave, THEY ARE NEITHER.

March 26 2013 at 3:22 PM Report abuse +2 rate up rate down Reply