|RALEIGH — When Andrea Jones fills out her tax forms each spring, she must identify herself as single by law. But Jones is not single. She and her wife, Beverly (who asked not to be identified by their real names) were granted a civil union in Vermont in 2000 and now live in Fayetteville, N.C.
Eleven U.S. states have legalized civil unions or domestic partnerships, which provide some of the same rights as marriage. Massachusetts, legalized same-sex marriage in 2004.
But unlike married heterosexual couples, same-sex partners in every state must file individual federal tax returns. Even married same-sex couples in Massachusetts must file individually because, under the 1996 Defense of Marriage Act, the Internal Revenue Service is prohibited from recognizing same-sex unions.
Lara Schwartz, legal director of the Human Rights Campaign, said the prohibition means that some same-sex couples must pay considerably more in taxes. For couples in which one partner has much higher income than the other, joint filing would save them money, she said. But for couples with similar income, marriage might actually result in a tax penalty.
“The more equal you are, the more you are penalized,” she said.
For example, if one person in a couple earns $100,000 each year and the other earns nothing, legal marriage would entitle them to a considerable tax bonus. But if each partner earns $50,000 a year — the same total income as in the first scenario — they would have to pay more in taxes if they filed jointly than if they filed separately.
Schwartz said that even if some same-sex couples had to pay more in income taxes, they would benefit from other tax breaks available to married couples.
Under IRS rules, for instance, the portion of employer-paid health insurance that covers a domestic partner is considered part of the employee’s taxable income. Married couples are exempt from the tax.
Jones said that the cost of health insurance for her partner, plus taxes, reduces her income by about $100 a week.
“It just cuts my paychecks down tremendously,” she said. “It makes me angry. It doesn’t matter that we’re having a life together.”
A federal bill introduced last year by Rep. James McDermott (D-WA) would extend the health insurance tax exemption to some unmarried partners. Rep. David Price (D-NC) is one of 15 co-sponsors of the bill.
Paul Cox, a spokesman for Price, said the congressman supports the bill as a matter of conscience. But Cox said the House committee that studies tax code changes may not consider the bill this year.
“There aren’t any immediate plans to hold a hearing on that bill,” he said.
Lorraine Johnson, a certified financial planner in Raleigh, said same-sex couples must also be wary of taking mortgage interest deductions. Unlike heterosexual married couples, who can both claim deductions for interest on a joint mortgage, same-sex couples must choose which partner will take the deduction, she said.
“It’s a pain in the neck,” she said, especially when both partners have been paying for the mortgage.
“Who gets to take the deduction?” she asked. “Can you divide it up, and is that illegal or at least frowned upon by the IRS?”
Johnson added that gift taxes can cause problems for many same-sex couples. Married couples can transfer unlimited amounts of money between each other, she said. But same-sex couples must pay taxes on gifts to each other of more than $12,000.
Johnson said that to avoid the tax, she and her partner avoid transferring more than $12,000. “If one of us has a big year and wants to share it with the other, we don’t,” she said.
Ian Palmquist, executive director of Equality North Carolina, said the upshot of the tax disparities is that same-sex couples are “paying more for less benefit and less protection from our government.”
He said the ideal solution would be to allow same-sex couples access to legal marriage. “Short of that, there are some steps that could be taken in terms of domestic partnerships or civil unions, but neither of those will provide the same rights…as marriage.”
— Sara Peach is a Roy H. Park Fellow enrolled in the masters degree program at the University of North Carolina at
Chapel Hill School of Journalism and Mass Communication.