As we were married in September, this was our first tax year filing as (gay) married folks instead of white bread single people. And basically, it’s a mess. It’s such a mess that when you Google “same sex marriage tax filing” or similar, you get directed to a bunch of information by sites like H&R Block and TurboTax that describe the situation and basically end up saying, “We don’t exactly know — but it’s complicated.”
So I thought I’d share a little about our process: how it worked, what my frustrations (as the preparer for our household) were, and how we actually came out in the tax department as a (gay) married couple versus what the numbers would have been like had we been possessed of more, shall we say, diverse anatomy.
We talked to a bunch of people, and poked around online, and basically it boiled down to this:
1. We each had to prepare and file federal tax returns “as if” single, because thanks to DOMA the federal government thinks we are single — or is at least legally bound not to recognize our marital status.
2. Then, we had to prepare a third federal tax return as a married couple — but not file it. This return provided the calculations for completing…
3. … our forth form, the state return, for which we could file as married (because we are). We could have chosen “married, filing jointly” or “married, filing separately.” This year, we chose to file jointly. To be certain whether this was the optimal choice, we would have had to complete two additional forms and I just didn’t have it in me.
So once we’d gathered all the necessary forms and numbers (W-2s, 1099-Misc, 1098-Es, proof of health insurance, professional expenses, etc.) it was time to get started.
I chose to go with TurboTax again, as I have for the past five years or more, mostly because I’m familiar with the interface and I didn’t want one more new variable to work with. I use the online version, Free Federal and Basic editions (we had to use Basic for Hanna’s federal and our joint return because some of Hanna’s income is technically self-employment income).
TurboTax does offer a desktop edition that, they claim, can streamline all of this same-sex marriage filing hijinks, but I was wary of upselling — if you’ve ever used TurboTax, you’ll know they take every opportunity to promote the next level of service / additional products that add to your bill. We could have saved some fees this way, so if we’re still in DOMAland next year, I’ll probably go with the desktop version.
In order to file while (gay) married online you have to open three separate accounts: one for each of your federal returns, and one for the married state return. Each of these will entail fees based on the level of complexity of your return. For ours, we paid for one Free Federal ($32.99) and two Basic ($56.98), for a total of $146.95.
Remember: TurboTax charges for preparing not filing your taxes, so in all cases you’ll be paying the fees for both federal and tax forms, even if though you will not be filing half the returns prepared.
As a straight-married couple, we would have paid only $56.98 to file a joint return through TurboTax online.
I won’t go through the step-by-step of entering your information — y’all know how to do this. TurboTax is occasionally over-helpful, occasionally under-helpful when it comes to the same-sex marriage situation. The interface repeatedly reminded me not to file the “dummy” state and federal returns, but when it came time to actually file them, I had to check and double-check and force them to let me “print to file by mail” the returns we weren’t actually filing. There was no option to simply not file due to being gay married. And, as I pointed out above, even though there’s no need to prepare or file individual state returns, TurboTax wouldn’t let us not prepare them alongside our individual federal returns (an option which would have saved us about $65.00).
So that was the TurboTax experience; what about the actual tax cost/benefit of being gay married?
Without getting into the tedious details, Hanna and I — as a couple — made a little over $54,000.00 this year as a household. I brought in slightly more and Hanna slightly less, a fact that only really matters (since we pool all our earnings in shared accounts) because at some point our marital status could determine which tax bracket we fall into — and if DOMA is still in place, we won’t be able to take advantage of that marriage entitlement.
For example, according to Wikipedia, as a single person (my federal legal status under DOMA), my tax rate jumps from 15% to 25% once my annual income is above $36,250 — which it will be for the 2013 tax year. As a married couple, our tax rate would stay at 15% until our combined income rose above $72,500. This difference was established back when the majority of married couples had one earner (usually the husband) who brought in the primary income, while the other earner (usually the wife) brought in supplementary income. It’s an attempt to recognize that a married wage-earner with dependents to support, even if only a spouse with a lower income, often has more cost-of-living expenses than a single person: that $36k or $76k per annum has to go further.
Of course, at the level of income Hanna and I are bringing it, we aren’t seeing a yawning chasm between what we would have paid and what we actually paid. Between deductions for student loan interest payments, retirement savings, and health insurance premiums, the difference between our federal “as married” and “single” tax returns amounted to about $200.00.
In other words, without DOMA on the books we probably could have bought that armchair from IKEA we’ve got our eye on.
According to TurboTax, our “effective tax rate” (once all our deductions and credits are taken into account) as a married couple would have been 7.66%. Hanna’s “as single” effective tax rate this year was 6.08% this year and mine was 9.09%. Basically, for our household, filing as married would be the most accurate reflection of the fact that our financial resources are pooled, supporting two adults (and two cats!) equally rather than one individual and another individual
There are people who argue that such marriage-based tax benefits (or, for some, “penalties”) should be abolished. They certainly have a case to make. But the point is that under current tax law and DOMA, Hanna and I are treated differently from other married couples solely on the basis of our sex.