Gay and lesbian couples are paying as much as $6,000 more at tax time than their heterosexual counterparts because the government disallows them from filing together on federal tax returns, a joint study between CNN Money and H&R Block has found.
The disparity between tax costs for same-sex and heterosexual couples stems from the 1996 "Defense of Marriage Age Act," which ruled that even if individual states decide to recognize same-sex marriages, those unions will not be recognized for all federal purposes including family insurance benefits, veterans' rights, and federal taxes. As a result, married gay and lesbian couples living in one of the few states that recognizes same-sex marriage may receive all the benefits of filing joint state returns, but when it comes to federal taxes, each partner must file individually.
"This means they can't combine their income and deductions to take advantage of lower tax rates," CNN Money explained in its analysis of the study. "It's also harder for them to qualify for certain tax breaks because the credits phase out sooner for single filers."
To figure out exactly how much money the government's irrecognition of same-sex marriage is costing couples at tax time, CNN Money presented H&R Block with a variety of financial scenarios and asked them to compare what the tax bills would be in the case of same-sex couples and heterosexual couples.
One scenario considered a family of four with one working parent earning $100,000 per year. H&R Block calculated that a straight couple filing jointly on federal fax returns would end up with federal tax bill of $10,656. If the couple were same-sex, however, the bill would be $15,199, or $4,543 higher. That's because instead of filing jointly, one parent would be required to file as "head of household" and the other would be considered a "qualifying relative."
According to CNN Money:
Filing as "head of household" instead of "married filing jointly" exposes more income to a higher tax bracket. Plus, standard deductions, which are given based on the filing status to taxpayers who don't itemize deductions, are lower for a head of household than they are for married couples filing jointly.
Another challenge is the amount of extra time and money same-sex couples often need to spend simply preparing taxes, according to MSNBC. State tax returns are based on federal returns, so if the couple were legally married and living in a state like Massachusetts, they would need to prepare a joint state return, a "dummy" joint federal return for the Massachusetts Department of Revenue, and two individual returns. That's four total returns instead of one.
Luckily, more and more employers around the nation are reimbursing employees in same-sex unions for additional taxes they incurred due to federal laws. Starting on Jan. 1, 2012, Yale University and Columbia University will begin reimbursing employees for the extra taxes they must pay on partner's health insurance, The New York Times reported.
As for the Defense of Marriage Act, the Senate Judiciary Committee has voted for its repeal, but strong opposition in the House means overturning the bill is a long way off.
Check out CNN Money for the full results of the study and methodology and check out the New York Times' series "The Cost of Being Gay" for more information on costs incurred by same-sex couples.