There is a little known rule that is available to help
Registered Domestic Partners (RDP) in community property states. This rule, when applied to a couple in the
correct circumstance, can result in a significant federal income tax
refund. We call the application of this
rule, the RDP Advantage™.
With the RDP Advantage™, RDP couples can report their
taxable income in the most advantageous way possible. This may involve reporting wages on one
partner’s tax return, both returns or splitting it between the two
partners. The benefits can be even
greater if the couple has children.
Since tax nuances at their best are dull, we will demonstrate
how the RDP Advantage™ can be applied by presenting an actual case study from
our office: Spoiler Alert, the couple saved
an extra $60,000 in income taxes and got that money back as a tax free refund.
M and D are
registered domestic partners who adopted two children in 2010. M works as an employee and earns $250,000 annually. D is a stay at home parent. When the couple came to our company (AdoptFund,
Inc., our adoption credit division) they had been told they were not entitled
to a refund from the IRS, not for their adoption, or for any other reason. A friend of theirs, our client, referred
M&D to our office to see if we could help them get money back from the
IRS. At first, it appeared that M&D
were not eligible for a refund, but when we looked at applying the RDP
Advantage™ to their tax situation, everything changed.
- Their tax status changed, resulting in an immediate refund of $5,000;
- The applied tax rates resulted in an additional $30,000 refund (over two years);
- The application of the RDP Advantage™ reduced each taxpayer’s income below the adoption credit threshold resulting in an additional $25,000 in refunds.
- Net refund (before accrued interest) more than $60,000.
These results were better than most because of the income
differences between the partners and the adoptions in the affected years. If there had been no adoption credit, this
couple would have still received about $30,000 in tax refunds. Imagine what you can do with this tax free
refund!
As mentioned above, the RDP Advantage™ is only available
in community property states that recognize Registered Domestic
Partnerships. Currently, the four states
are California, Nevada, Oregon and Washington.
If you live in those states and are in an RDP, you may be eligible for
this special tax treatment. Feel free to
use our Refund Calculator to see if you are
eligible for a refund or call or email our office for a free consultation.
