The Same-­Sex Marriage Decision: What’s at Stake for Couples (@tarasbernard @nytimes)

Tara Siegel Bernard at The New York Times explains what's at stake financially for same-sex couples as we await the decision from the Supreme Court:

Full article at The New York Times

"The highest court’s landmark decision in 2013, United States v. Windsor,
already established that married same­-sex couples were entitled to federal
benefits. But two major federal agencies, Social Security and Veterans Affairs,
must still look to the states to determine marital status, so couples living in
nonrecognition states are generally cut off from receiving those benefits.
Same­-sex couples are not entitled to many state­-conferred benefits either."



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

Tax Day extra difficult for many same-sex married couples (@stephenatap @AP)

For same-sex couples living in states that do not recognize same-sex marriage, filing taxes can get very complicated:

Full Article from the AP

"It gets complicated because most state income tax returns use information from a taxpayer's federal return.
Straight couples simply copy numbers from one form to another. But that doesn't work for same-sex couples reporting combined incomes, deductions and exemptions on their federal tax returns. These couples must untangle their finances on their state returns, where they are still considered single."



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

In Love? 9 Financial Facts To Know About Your Partner Before Commitment (@laurashin @forbes)

Laura Shin does a nice job of summarizing questions to think about before moving to the next level.


http://ow.ly/IXK3V


"If a major commitment is on the horizon for you and your loved one, you’ll also need to start thinking of the practical side of taking a relationship to a deeper level — namely when it comes to money. While it may not sound all that romantic, becoming more serious about someone does have financial implications. It even has consequences for your relationship: being clear about money from the outset can obviate potential disputes."

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

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

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

Seven money mistakes to avoid in your 20s (from Anna Helhoski, csmonitor.com)

Great article by Anna Helhoski (@AnnaHelhoski) on financial pitfalls of people in there 20's and beyond.


http://ow.ly/H4g1X


"For the YOLO generation, your 20s may seem like they’re all about embracing mistakes. But when it comes to money, what you do now can make or break your future financial success. Here are seven money mistakes you’ll want to avoid in your 20s."

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

LGBT seniors face special challenges in retirement (Emily Starbuck Crone, csmonitor.com)

Emily Starbuck Crone (@emstarbuck) spells out issues facing LGBT seniors in retirement.


http://ow.ly/H4icJ


"LGBT couples can face high levels of financial insecurity in their retirement years. Many in the LGBT community do not trust traditional financial institutions, and retirement income streams like social security benefits, state pensions, and more do not always recognize same-sex partners."

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

A Response to Leelah Alcorn's Suicide Note by Jennifer Finney Boylan (@nytimes)

An opinion piece from Jennifer Finney Boylan (@nytimes) on how society should address the issues raised by the tragedy of Leelah Alcorn.

“It happens every year, people coming together to mourn trans individuals lost to murder or suicide. As a trans woman, I wish that the one day on the calendar that recognizes transgender experience was about celebrating the successes of our diverse community, rather than counting the lives we’ve lost. But the losses go on, year after year.”

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

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

Buyer Beware [10 Subliminal Retail Tricks You’re Probably Falling For]

Susie Poppick @susiepoppick of Money shows us how we are manipulated to buy.  Buyer beware.


http://ow.ly/GlXoy




"Consumer experience these days is not simply designed; it’s engineered. Research determines the ads you see, the scents and sounds you encounter in stores, even the way a salesperson might casually touch your arm. It’s not all high-tech brain science, but here are some of the tricks companies use to entice you to spend more."


Check out of website for more information http://www.lgbt.tax/

This is why people carry credit card balances [FromMarket Watch]

Interesting article from Simon Constable on why we carry credit card debt.


http://ow.ly/GiXUV


"Why do people so often carry credit-card balances costing 10% to 20% a year, while at the same time keeping money in savings accounts that pay less than half of one percent?"

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

Transgender Kids, Tough Choices [Press Play with Madeleine Brand]

Great piece from Press Play with Madeleine Brand @themadbrand on @KCRW entitled Transgender Kids, Tough Choices.  Worth the listen.


http://ow.ly/GaKeG

For examples of how others were helped by LGBT.tax check out http://www.lgbt.tax/case

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

Another good article from Kathleen Pender (http://blog.sfgate.com/pender).  This one discusses an often overlooked property tax exemption for people over 65 years of age.  http://ow.ly/G47tB




"California homeowners 65 and older should check their property tax bills and make sure they are getting any senior exemptions on school parcel taxes to which they are entitled. These exemptions could reduce their tax bills by hundreds of dollars, or more than $1,000 in some wealthier districts."

For examples of how others were helped by LGBT.tax check out http://www.lgbt.tax/case

Donations to CA Universities costs almost nothing (after tax breaks) [You can now apply for big college donations]

This article http://ow.ly/FGUyR from Kathleen Pender of SFGate.com talks about a way to donate to Universities in California and get most of the funds back through tax refunds.  It shows how states are getting creative about funding education.

"A state agency is now taking applications from people who want to donate to a new higher education fund and get most of their donation back in the form of federal and state tax benefits."

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

Great Message from Starbucks

The Starbucks/MLK ad shows if we look differently at the world, we can see things "clearly." http://ow.ly/i/8jrSg

Check out of website for more information about us http://www.lgbt.tax/

Tax Planning for 2014

This year's tax planning is going will focus heavily on timing of income and expenses, as the Medicare investment tax (MIT) of 3.8% can create an additional tax burden.  Taxpayers should be advised that some tax benefits available in 2013 are not available in 2014, as Congress has allowed some provisions to lapse. These provisions, which include bonus deprecation, larger section 179 deductions (expensing depreciable assets in the year of purchase), and a number of tax credits, such as the Research and Development Credit, may be reinstated, but with the gridlock in Washington, it is unpredictable.

 

Assuming that your income is high (above $400,000 in 2014), consider the following income shifting ideas:

1. Pay your real estate taxes, personal property taxes and state income taxes before year end in order to decrease your taxable income by increasing your itemized deductions.  (Note: These deductions can phase out and/or be limited by alternative minimum tax [AMT].)
2. Reduce income by taking advantage of other tax-exempt investment vehicles, such as muni bonds, which are tax-free for federal purposes, and, in most states, home-state bonds are also state tax-exempt for state purposes. (Note: Keep AMT in mind with private activity bonds).
3. “Depreciate” using a Section 179 deduction of up to $25,000.
4. Congress still has not reinstated the Research and Development credits or nonbusiness energy credits, but given their popularity will likely do so before year end. Plan on them being reinstated, but understand the potential risks.
5. With the business energy credits remaining, capitalize on investments that creative these credits. These credits are for taxpayers that install solar, geothermal, combined heat and power (CHP), geothermal heat pump, fuel cell, micro-turbine or transition energy property for use in their business. The credit can be as much as 30 percent of the cost of the property.
6. Timing of capital gains and capital losses so that you do not inadvertently exceed the MIT limits and create an increased tax liability.
   1. Consider a 1031, tax free exchange, where possible.
   2. Consider an installment sale as it will delay the recognition of the gain until the funds are received.
   3. Consider taking losses to offset gains (Note: Losses themselves are limited to $3,000 a year in excess of gains.  Also, selling at a loss and repurchasing at least 31 days later avoids wash sale rules).
7. Maximize contributions to retirement accounts to reduce current year income.
8. Minimize distributions from retirement accounts.

All of the ideas above assume the need to reduce income for this year.  The converse may be true.  If you anticipate a very strong 2015 and your income is significantly lower in 2014, it may be effective to employ the opposite strategy and increase your income for this year.  Keep in mind that, by accelerating income and reducing expenses, you will be paying taxes early and the earning potential of those early tax payments should also to be considered.

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.