The tax challenges and estate planning costs of the same-sex couples are comparatively more than that of other couples. When they wish to share their wealth with their spouses, they may have to cope up with some additional costs. Let us take a look as to how things are different for them:
Rules regarding gift tax
It is giver and not the recipient who has to pay the tax. Regardless of marital status, one person can gift cash, property or other assets worth $14,000 in 2013 and it will be considered as tax free. Apart from this, there is a life time gift tax exemption of $5.25 million. All these breaks are easily available to married couples recognised by the IRS. Couples who are heterosexual face no limits on gifts or transfer of property. However, gay and lesbian couples do not get any such exemptions due to the Defense of Marriage Act (DOMA). It should be noted here that when gay person gift $20,000 to his partner, $6000 of it is goes toward the lifetime gift tax exemption. Also, the giver of the gift has to report it on Form 709.
No spousal estate tax benefits
Heterosexual couples face no limits on transfer of property to their spouses. But gay and lesbian couples do not receive any such breaks. Thus, in case of death of one spouse, the other person may not receive the property tax-free. The person alive may be liable for paying estate taxes. The situation can change if the same-sex marriages get recognised by the government for federal tax purpose. This will help them get the unlimited exemption regarding transfer of property after the death of one spouse.
No gift splitting benefits
The advantage of gift splitting is also not available to the lesbian and gay couples. With gift splitting, the gift amount from any of the spouse – husband or wife, will be considered as given by both the spouses. This helps the couple to cushion their annual gift exemption. In some states like Massachusetts where same-sex marriages are recognised by law, it becomes easier for the same-sex couples to deal with marital deductions.
It has been said that the discrimination against same-sex couples actually violate the constitutional guarantee of equal protection under the law. There are many same-sex couples who are waiting to make tax moves after they get some advice from the Supreme Court.