On June 26th, 2013, the Supreme Court finally scrapped the Defense of Marriage Act (DOMA); the law signed by President Clinton in 1996 that consequently denied same-sex couples 1,138 federal privileges and programs that were available to opposite-sex couples. During a historic 5-4 decision the Supreme Court struck down this law that cost many LGBT couples thousands of dollars in taxes that could not be declared as well as many wasted hours doing unnecessary property tax returns. The law also sentenced LGBT spouses to a poverty-stricken old-age as they were not exempt from property taxes if an estate was passed on to them after their spouse’s death.
Although it is good news that marriage is no longer strictly defined as a union between a man and woman on the federal level, the sobering fact is there are only twelve states plus the District of Columbia that recognize gay marriage as legal at the state level.
The great news is that if you live in one of these states you will soon be able to benefit from tax breaks and spousal benefits that were previously denied to you. Gay and lesbian couples will no longer be shouldering the higher tax burden that they have for decades because they can now file estate tax exemptions and head of household deductions.
In fact, it is highly recommended that if you are in a gay or lesbian relationship that you keep in close touch with your accountant/cpa over the next few weeks to see if it is appropriate for you to file amended tax returns for the past couple of years. As DOMA was declared unconstitutional it may be possible for some couples to recoup money paid out in separate returns if your joint return far exceeds those threshold deductions.
Same-sex spouses can also now file tax returns jointly, which will also help the couple build a nest egg sooner. This will help many LGBT couples afford a larger home if desired, and possibly build an investment property portfolio. In some states where marriage is legal couples had to file jointly with the state and then follow up with individual tax returns that had them splitting their income. For many individuals this meant that not enough money was declared to meet the minimum deduction threshold, whereas sometimes thousands of dollars could have been saved if they had been allowed to file the taxes jointly in the same way as the married same-sex couple living next door!
The ability to file joint tax returns also makes processing credit easier for LGBT couples. The amount of paperwork required to composite the two separate incomes, credit scores and other aspects of the mortgage application will now be much less complicated.
The striking down of the federal Defense of Marriage Act also means that gay couples can now pass their assets on to a surviving spouse without having to pay real-estate taxes that prohibit them for doing so. Over the long term many gay couples will be able to also collect spousal benefits under Social Security or because they were married to a veteran which in turn allows them to stay in their home longer and benefit from the escalation of value of the equity in the home over time.
Overall LGBT individuals can expect to become more prosperous if they are legally married. However if the couple moves from a state where gay marriage is legal to one that is not, they may be facing some very interesting bureaucratic snarls that prevent them from having all of their rights recognized even though they are living in the post-DOMA era. Those that do live in the states where gay marriage is legal will find themselves enjoying real prosperity, less red tape and peace of mind.
Author Jeff Hammerberg is the Founding CEO of http://www.GayRealEstate.com. Free Instant Access to the Nation’s Top Gay, Lesbian and Gay Friendly Realtors Coast to Coast. FREE Buyers Representation ~ Free Relocation Kit to any City, USA ~ Free Sellers Market Analysis for home sellers.