Study sheds light on same-sex tax disparity

A tax study by CNN Money and H&R Block found that same-sex couples could end up paying thousands of dollars more in taxes every year than heterosexual married couples.
BY TIFFANY GIBSON tgibson@opubco.com Published: January 8, 2012

Income tax season is the busiest time of the year for Tulsa certified public accountant Kelly Kirby, who prepares about 400 returns.

It's also a reminder that he and his partner of 14 years often pay more taxes, because they're not allowed to file jointly as a married couple.

“All of us want to pay our taxes but not more than we're legally obligated to,” Kirby said.

According to census data, there were more than 9,800 same-sex partner households in Oklahoma in 2010.

A new study by CNN Money and H&R Block shows that same-sex couples could be paying thousands of dollars more in taxes than heterosexual married couples.

Kirby, 58, married Charles Johnston, 53, in 2008 in California. They have a marriage license, but must file single returns because Oklahoma and the federal government only recognize marriage between a man and woman.

He said it would be beneficial for the two to file together because they make significantly different salaries and the standard deduction for a married couple might save them money and put them in a lower tax bracket.

“They don't respect our relationship,” he said. “They don't acknowledge our relationship.”

The study looked at same-sex couples and married couples in various scenarios for its assessment of tax liabilities. It shows that some same-sex spouses would have a lower liability, while others would have an increased liability.

Gil Charney, principal tax analyst at the Tax Institute at H&R Block, said the study only takes a look at income tax, but he said there are many issues that same-sex couples need to look at and plan for.

“A same-sex couple should get professional advice as to what effect the relationship has on their total tax and financial planning situation, including state tax planning,” he said.

Since the Internal Revenue Service is bound by the 1996 Defense of Marriage Act, same-sex couples are not allowed to file jointly as married couples. If they were able to, they would receive $11,600 as a standard deduction off their total 2011 income and $3,700 for exemptions.

Paula Ross, spokeswoman for the Oklahoma Tax Commission, said state returns follow federal tax laws, which means Oklahoma same-sex couples cannot file jointly in their state tax returns either.

The study reports that some same-sex couples earn disparate amounts of income and aren't able to combine their incomes and deductions. H&R Block also notes in its study that “employer provided health insurance for same-sex spouses is considered taxable income, causing a greater amount of income to be taxable than similarly situated married filing jointly filers.”

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At a glance

Household trends

The traditional, nuclear family unit of husband, wife and children accounted for more than 21.4 percent of Oklahoma households in 2010. That's down from 24.7 percent a decade ago.

The number of nuclear family households fell 5.9 percent in the past decade to 312,372, according to an analysis of census data.

Married couples with no children at home accounted for 28.1 percent of households in 2010, up 6 percent.

More than 79,580 Oklahoma children were being raised by a grandparent in 2010.

Unmarried partner households jumped by 63 percent in the past decade. They now make up 5.9 percent of all Oklahoma households, up from 3.9 percent of households in 2000.

There were more than 9,800 same-sex couple households in 2010, an increase of 70 percent from 2000. Same-sex households make up a small part, 0.67 percent, of all households in the state.

Tying data to taxes

Ken Kiser, Oklahoma State University professor of sociology, says it's no secret that cohabitation has increased dramatically over the last 20 years. Because of that, divorce is on the decline but so is marriage.

“Cohabitation is the new normal and that's unlikely to change,” he said.

With married couples currently receiving larger standard deductions, credits and benefits by filing their taxes jointly, he said most of the people living together will not reap the same rewards.

But the benefits might not always help married couples save money, especially with more women working outside of the home.

Kiser said most marriages now involve both spouses working with women earning 46 percent of the family income. He said two working parents will increase the amount of income, meaning the $11,600 standard deduction for married couples won't always be as helpful.

“Tax policy that is tied to marital status is usually a little behind what the marital status is and what direction it's moving in,” Kiser said.

Common-law marriage couples

Paula Ross, spokeswoman for the Oklahoma Tax Commission, said the state and federal government recognize common-law marriage and allow people in such relationships to file tax returns jointly as married couples.

Sheryl Craig, district manager for Oklahoma City North and H&R Block-enrolled agent, said if a common-law couple files their taxes together, they are seen as married in the eyes of the federal government. Therefore, they would have to get a divorce if the relationship ended.

TIFFANY GIBSON, STAFF WRITER


Common-law marriage couples

Paula Ross, spokeswoman for the Oklahoma Tax Commission, said the state and federal government recognize common-law marriage and allow people in such relationships to file tax returns jointly as married couples.

Sheryl Craig, district manager for Oklahoma City North and H&R Block-enrolled agent, said if a common-law couple files their taxes together, they are seen as married in the eyes of the federal government. Therefore, they would have to get a divorce if the relationship ended.

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