Why You Need Tax Planning This Year

If you are in a same-sex relationship you want to look at your tax situation.

Married gay coupleIf you’re legally married, you will have to use a “married” filing status for 2013 when you file your Federal return.  Find out how this will affect your tax bill and see if there are actions you can take before December 31st to save money.

Many same-sex couples are about to discover first-hand the “marriage penalty” written into the tax code. You may find that you’re no longer able to make a tax-deductible IRA contribution because your combined household income is over the limit.  Or, you may discover that your deductions for active rental losses are significantly less than what they were last year.  In past years, some couples were able to take losses of  $25,000 on each partners return for a grand total of $50,000 of losses.  This year under the best circumstances, they will only be able to take $25,000 and in some cases due to income limitations they may not be able to take any of these losses on the current year return and instead the losses will add to their passive loss carryovers.  These are only a few examples of how marriage impacts a tax return.

There are many phase out limits you may bump up against with in your combined return that one of you, or both of you, didn’t encounter before.

On the other hand, if your income levels are different — maybe one of you has no income at all — then you may benefit by paying a lower tax rate on more of your joint income than the single wage earner could in 2012.  Other married rates and limits can help a couple if they have unequal incomes.

For some couples filing as married will be a big deal.  Find out now.  Contact a CPA to see if you’d benefit from a tax projection.  Or, if you do your own taxes, recalculate your 2012 return as “married” for a rough idea of the changes you’ll see in 2013.

Finally, if you’re a same-sex couple considering marriage, do the same review. If you’re envisioning only a small, simple wedding to secure your legal rights, you may decide to get married sooner, in 2013, to receive a break on your taxes. Or, if you discover that you’ll be paying more in taxes after you’re married, you may decide to postpone the nuptials until at least January 1st so you can enjoy the filing single status one more time.

Like so many issues in the complex tax situation we have, there is no universal answer to whether you’ll pay more or less as a married couple.  But, a Fall examination of your taxes could make a big difference next Spring.