5 Smart Financial Moves for Umarried Couples Who Live Together (Farnoosh Torabi @FARNOOSH)

Farnoosh helps focus the financial concerns for unmarried couples. 


http://ow.ly/ID5ZW


"If your relationship is serious but you don't have any plans to walk down the aisle, you'll want to take some extra steps to protect yourselves financially."

To have us call you about finance, estate planning or tax issues, fill out the form at http://www.lgbt.tax/Start

Gift Tax -- Things to Keep in Mind

Everyone loves giving gifts, but depending on the value of the gift, you may have to make one to Uncle Sam as well.

Federal law requires every person who makes a gift of cash or property to another person (except their spouse) to file a gift tax return and pay taxes if the value of the gift is more than the gift tax annual exclusion. Gift taxes are paid by the donor of the gift, not the recipient.

In 2015, the annual gift tax exclusion amount is $14,000, although it increases every year. Gift taxes are calculated on the portion of the gift that exceeds the annual exclusion; in 2015, the gift tax rate is 40%. Gifts are also cumulative, meaning it is the total amount of all gifts made to a single person each year, and not the individual value of each gift.

So if in one calendar year you make one gift of $20,000, or four gifts of $5,000 each, to the same person, you must file a gift tax return. The tax will be calculated on $6,000, the difference between the $20,000 gift and the $14,000 annual exclusion.

There are certain exceptions to the gift tax requirement. No gift tax return is required, and no taxes will be incurred, if the gift was made to benefit any of the following:

• Spouse. The marital exclusion only applies to couples who are legally married; couples in domestic partnerships do not benefit from the exclusion.  With the Repeal of DOMA, this is one more reason to consider marriage.
• Education or medical institutions. Payment for someone’s education or medical expenses are not subject to gift tax, provided the payments are made directly to the educational institution or medical provider. So if you are paying for your son’s or granddaughter’s college education, make sure the payments are made directly to the college, not to your son.
• Charitable donations. The recipient must be a recognized by the IRS as a qualified charitable organization.
• Political contributions. The recipient must be a recognized political candidate or organization (keeping in mind state and federal election finance rules).

If you make a gift that triggers the gift tax, you have two options. The first is to file a gift tax return in the year the gift is made and pay taxes.

The more popular option is to apply the gift toward your lifetime estate tax exemption, which is currently $5.43 million (remember, the amount applied toward the exemption is the amount that exceeds the $14,000, or the then applicable, annual exclusion). This then reduces your available estate tax exemption, which is the amount of money each person can pass onto heirs or beneficiaries, tax-free, at his or her death. When you die, if the total value of your estate is less than the estate tax exemption amount, as adjusted, (which it is for the vast majority of people), the end result is a tax-free gift to beneficiaries.

If you filed taxes in CA, NV, OR or Washington states and are (or were after 2010) Registered Domestic Partners, try our calculator to see if you may be eligible for an IRS refund http://www.lgbt.tax/Calculator

Social Security Post DOMA

The Supreme Court’s June 2013 decision to knock down DOMA (the Defense of Marriage Act) helped usher in more accepting times where same-gender couples in the United States face one less roadblock to go up against. In repealing the law (in which same-gender marriages wouldn’t be recognized by the government), a blanket of oppressive thinking has been removed and in states in which same-gender marriage is legal, such advantages as employees being able to gain access to health insurance for their partners has been granted. But what of the other financial benefits? The repeal of DOMA has also had a significant economic impact  as it finally allows same-gender couples to gain access to social security benefits that any other married (opposite gender) couple would, which is one of the biggest post-DOMA outcomes of all.

 

A pillar of a couple’s plans of how they’ll spend (both in time and in terms of money) their retirement is that all social security benefits previously allowed for opposite gender couples would now be granted to those of the same gender. That includes being able to receive 100% of a deceased spouse’s benefits (if it’s less than their own) even if the surviving spouse is divorced from their deceased partner. It also includes Medicare benefits (which are available even if one spouse hasn’t contributed), disability benefits and in couples where only one spouse is earning, they can receive a spousal benefit of an extra 50% of the worker’s retirement benefit while both spouses are alive. Even federal benefits for same gender couples (which were restricted immediately following DOMA due to lack of a ‘for’ decision by the President) are now on the table thanks to a ruling from President Obama last month that made it so. So things are arguably on the up, right?

 

Yes and no. These social security benefits are only a heart-warming symphony to the ears if the same gender couple in question resides in a state where same gender marriage is recognized (New York, California, Washington etc.) as for those who may have been married in one of the same gender marriage allowing states but who live in a state that doesn’t recognize it, things will sound more like a cacophony to the ears as their hopes crash around at their feet. That’s because the Social Security Act states that the marriage has to be recognized where you "domiciled when you filed for benefits” which is as blatantly exclusionary as it is unfortunate.

 

Rep. Mark Takano, a Democrat from California would like to change that with proposed legislation that would see couples given access to social security regardless of their state’s policy on their marriage. While hopeful, Republicans hold the House majority and are unlikely to support the bill enough to see it go through, but as a decision has not been fully decided, this could be a huge step forward in post-DOMA financial benefits yet.

 

Resources: NY Times, Lamda Legal, GLAD, Politix

 

If you filed taxes in CA, NV, OR or Washington states and are (or were after 2010) Registered Domestic Partners, try our calculator to see if you may be eligible for an IRS refund http://www.lgbt.tax/Calculator

The Marriage Tipping Point [Five Signs We've Reached the Marriage Equality Tipping Point]

Nico Lang of Rolling Stone had an interesting article about hitting the marriage tipping point.


http://ow.ly/FZCMo








"For those keeping count, this means that 32 states (and Washington D.C.) grant federal marriage benefits to gay couples, more than doubling the count as of this time last year. Following the Court's repeal of the Defense of Marriage Act last June, this moment marks a historic tipping point for the United States on same-sex marriage."

If you filed taxes in CA, NV, OR or Washington states and are (or were after 2010) Registered Domestic Partners, try our calculator to see if you may be eligible for an IRS refund http://www.lgbt.tax/Calculator

Banking as a Couple: One Checking Account or Two?

It is legal for same-sex couples to open and maintain joint checking accounts in every state in the country, even where gay marriages or even civil unions are not recognized. College roommates, a parent and a child or two Army buddies could all open joint checking accounts – without anyone asking if they’re gay or straight.

But is banking as a couple always a good idea? Consider the benefits and drawbacks before you decide.

Pros

• When two people share a bank account, they pool resources, with each then having access to more money than they would have as individuals.
• Simplification: The entire aggregate of the couple’s cumulative expenses is laid out in one single place on one single balance sheet.
• Transparency: Each can clearly see the expenditures of the other. This can be especially beneficial if one person is more financially responsible. The open nature of a joint account can make the more prudent party less likely to play cop, and can subtly goad the spendthrift into fiscal responsibility.
• It can make couples feel more like a couple – especially in states where same-sex marriage is not recognized. Perhaps more importantly, a joint checking account can serve as a “step” on the way to marriage (or basic cohabitation) to test the waters regarding financial competence, trust and compatibility.

Cons

• Loss of privacy: Everything one party spends – and, if you use a shared debit card, everywhere they spend it – is visible to the other.
• Neither party any longer has his/her “own money”, which can be difficult for independent people to accept.
• If one party earns more than the other, resentment can be a factor for both parties.
• Neither partner can be certain of current bank balance as both partners write checks from the same account.
   
• The biggest risk by far, however, comes down to trust, financial competence and potential for abuse. If one party sees a text message they don’t like on the other’s cell phone, they can take every dollar out of the joint account on their way out of the relationship, and the other party has essentially no legal recourse. If one allows tax arrears to fester, the government can seize funds in the account, regardless of whether the partner timely paid his or her taxes. A poorly maintained or frequently overdrawn checking account can degrade borrowing power or limit options for people whose credit is in poor shape, whether they were the ones who were irresponsible or not.

Sharing expenses is an intimate and personal choice for all couples – but it doesn’t have to be absolute. Consider maintaining separate checking accounts, but also open a combined checking account exclusively for shared bills (or emergencies) as a way to ease into this important and consequential decision.

For more information, contact us at http://www.lgbt.tax/contactus

What Married Same-Sex Couples Need To Know About Filing Income Taxes (Alexandra Temblador of The Next Family)

Good basic article by Ms. Temblador of The Next Family in Huffington Post on Same Sex Couples filing a joint return.  There are a number of other issues to consider, not the least of which is should the couple get married in the first place as married couples may be subject to the "marriage penalty."


http://ow.ly/HLHI1


"In 2014 we saw some major steps toward marriage equality in the United States. Although the celebrations have not ended and many are still fighting for marriage equality in the remaining states of the U.S., the couples that were married last year will find that things will be different for them in 2015. They begin a full year of marriage together. They might be starting a family together. Perhaps they bought a house. However, one thing is for certain in the next few months for these newlyweds: a whole new world of taxes."

If you filed taxes in CA, NV, OR or Washington states and are (or were after 2010) Registered Domestic Partners, try our calculator to see if you may be eligible for an IRS refund http://www.lgbt.tax/Calculator

The 5 Worst States for LGBT People (Nico Lang in Rolling Stone)

Nico Lang talks about the states to avoid, if possible.


http://ow.ly/I1Kov


"So where do LGBT people have it worst? According to Michaelangelo Signorile, the editor-at-large for the Huffington Post's Gay Voices section, the worst states are clustered in the Midwest and the Bible Belt South."

To learn more about us, go to our website http://www.lgbt.tax/about

Future of Donating [Donors to Gay Causes Consider Their Next Steps]

Interesting article on how the charity landscape has changed since the repeal of DOMA. http://ow.ly/FjRRU


"After a number of legal victories on same-sex marriage, where should longtime supporters put their money now? And will today’s triumphs make tomorrow’s donors think the struggle for gay equality has already been won?"

The RDP Advantage™

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. 

1. Their tax status changed, resulting in an immediate refund of $5,000;
2. The applied tax rates resulted in an additional $30,000 refund (over two years);
3. The application of the RDP Advantage™ reduced each taxpayer’s income below the adoption credit threshold resulting in an additional $25,000 in refunds.
4. 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.