Tax Relief Blog
Tax returns for registered domestic partners, including same-sex spouses, can be complex. The laws in your state, and more specifically community property laws, dictate how you file and which deductions you can claim. There are nine community property states in the nation: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Your state’s laws also determine how you, as a registered domestic partner, file your returns federally with the Internal Revenue Service.
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For instance, in California, domestic partnerships include all of the rights and responsibilities common to marriage. In 2010, the IRS ruled that couples that are registered domestic partners must combine their income when filing their federal tax returns; reporting half of the total income and half of the withholdings on their separate tax returns. This was due to a change in the California community property tax law. The good news is that if one partner is making significantly more than the other, it can result in savings on their tax bill. In fact, a recent California tax agency study stated that 60% of registered domestic partners that file jointly save around $500 annually. The same study found that 12% have a slight increase in tax liability, and the remaining couples would not see any difference.
According to the IRS site, registered domestic partners should complete Form 1040, U.S. Individual Income Tax Return, with wages and income, as well as deductions and corresponding schedules, according to the instructions. If you are filing as a registered domestic partner, you will need to complete the Allocation Worksheet in Table 2 of Publication 555, Community Property. This worksheet should be included with each return to explain how you computed the income, deductions, and federal income tax withholding reported. You will also need to put your partner’s social security number in the “Notes” section of the Allocation Worksheet, or attach a copy of your partner’s Form W-2 or 1099-R along with your own, noting the division of income and withholding on the form.
You can review Publication 555, Community Property, which answers many questions for couples who reside in community property states – including registered domestic partners and same-sex spouses. The website also has a page of frequently asked questions: https://www.irs.gov/uac/Questions-and-Answers-for-Registered-Domestic-Partners-and-Same-Sex-Spouses-in-Community-Property-States.
You may have a lot of questions. There can be confusion from the way to calculate gross income, to whether or not one partner can file as head-of-household, to specific tax rules for dependency, medical care reimbursements, social security benefits, Schedule C’s, to which tax credits, expenses, and deductions are allowable for both partners.
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