With more states permitting same-sex marriage, many same-sex couples have discovered the hard way that federal tax reporting for them is complicated and expensive. The same holds true for many state tax issues. These same tax hassles can become an issue when non-traditional couples who live in Massachusetts decide to file for divorce.
The main reason that taxes, and finances, have become an issue is because the federal government has yet to recognize same-sex marriages. And since many states also do not recognize same-sex marriages, the problem is only compounded. For many of these couples, professional help in the form of accountants, lawyers and financial planners may be essential.
To illustrate how complicated this can get, consider this: Married same-sex couples must file separate federal tax returns; this is a simple matter of fact. They can file joint state returns in Massachusetts, New Hampshire, Iowa and Vermont. This is true also for New York, Connecticut and the District of Columbia, where the marriages are legal. They can also file joint state returns in Oregon and California, as well as New Jersey and Illinois, which recognize civil unions.
It’s obvious that same-sex couples have a lot more challenges than others. Also, same-sex couples face financial issues that heterosexual marriages do not, such as the tax issue listed above. Knowing in advance what those challenges may be can help make the transition into marriage smoother. However, sometimes those additional challenges can be the catalyst to end what was once a happy union. Setting up pre-nuptial agreements before considering marriage can ease some of the disagreements if a divorce is on the horizon.
Source: The Reuters, “Personal Finance: Marriage is taxing for same-sex couples,” Kathleen Kingsbury, Nov. 10, 2011