Many gay couples in California will get a tax break due to a recent IRS ruling.

According to an article by the WSJ, Eric Rey of Berkeley, CA asked the IRS for clarification on how he and his same-sex domestic partner should report their income for tax purposes.  California is a community property state, and domestic partners must each report half of their combined income.  Until now, income could only be split by the 5% of California’s domestic partnerships that are heterosexual.  Since My. Rey earns much more than his partner, it would significantly lower their overall tax burden, if he could shift half of his income to his partner.  This week, the IRS ruled that all domestic partnerships in Calfornia must report half of their combined income on each partner’s individual tax return.  

The IRS is considering whether the new ruling will apply to other community-property states.

The WSJ article is titled: “Gay Couples Get Equal Tax Treatment,” but in truth it is a favorable treatment.  Splitting income is even better than filing as a married couple, which has the potential of the marriage penalty.  This new ruling should lower the tax burden for many gay couples in California.  Most gay couples in which one partner earns significantly more than the other will likely get a bump down in tax bracket.  The tax brackets for gay couples in which each partner earns approximately the same should stay the same, so those couples will pay no more (or less) tax.

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Tags: California, gay taxes, marriage penalty

This post is in honor of my partner’s 5th Annual Blogging for LGBT Families.

In many ways my family is as traditional as Ward and June Cleaver’s.

I go to work early in the morning.  My spouse gets our six-year old son up for the day.  She walks him to school in morning and home again, in the afternoon.  I usually arrive back by dinnertime when we all catch up on the events of the day.

The difference, of course, is that our little “Beaver” Theodore has two Moms.

“Breadwinner” perhaps, but less dough

I’m the only woman in my office, and likely in my company, who has the “breadwinner” role.  To start with, my employer has very few women employees.  (“Too hard to find female physicists,” they say.  I say, “try here.”)  My female colleagues who are married with children, also typically carry the primary childcare responsibilities, too.  Even among my male colleagues who are married with children, most have working spouses, and the men have at least some nominal amount of childcare responsibilities.  Therefore when there is a long business trip needed in my office it often falls to myself or one of my childless (childfree?) colleagues.

You might think that these extra opportunities might add up to additional visibility in the grand scheme of one’s career, but I’m not yet living that dream.  Maybe there’s some payoff way down the road, but in the meantime, I end up being the person in the office who spends the most time away from his/her child — not a title I aspire to.

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Tags: blogging for LGBT families day

My partner and I are accustomed to filling out forms that don’t reflect our family structure. We regularly scratch out “Father” and “Mother,” usually writing in “Parent” and “Parent”. We’ve trained our son’s school pretty well, and halfway through our first year with them, most of the forms we receive are addressed to the “Parents”.  Now that wasn’t hard, was it?

College and the FAFSA

Even though our son is only in first grade, it’s never too early to worry about how we’re going to afford his college education. (After all, it’s a mother’s prerogative to worry). The Free Application for Federal Student Aid (FAFSA) is used by most colleges and universities to determine how much a student should pay towards the cost of his/her education. Many, if not most, middle- and even upper-income families receive some sort of financial aid.

It occurred to me today that since my marriage isn’t recognized by the Federal Government, could I legitimately include just one parent’s income on the form? I’m not trying to cheat, but I do believe that Uncle Sam can’t have it both ways. If they choose not to recognize my marriage (which will (hopefully) be in its 28th year by the time my son starts college) then they have chosen not to recognize my marriage.

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Tags: FAFSA, gay taxes, LGBT personal finance, paying for college

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Plot spoiler: LGBT couples are treated differently than heterosexual marriages when it comes to inheriting IRA’s.  Here’s how to avoid having disapproving Aunt Sally end up with your dough.

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The US federal government doesn’t recognize the marriages of gay and lesbian couples. Consequently, LGBT folks have to take extra steps to make sure that, in the event of their death, their assets are distributed in accordance with your wishes.

A. What Happens When You Die

Not to get morbid or anything, but some folks die prematurely. Best to plan now (just in case) rather than later. A last will and testament delivered via Ouiji board will not be admissible in most courts of law.

In the event of your death, the assets in your 401(k) will be transferred into a traditional IRA.  If you had a Roth 401(k) it will be transferred into a Roth IRA.  Everything in this post that refers to an “IRA” also refers to a “401(k).”

B. The Beneficiary Form

The best and simplest way to transfer your IRA assets to your intended heir, is to name him/her/them on the IRA’s beneficiary form.  Keep it updated, and keep a copy.

Not only does the beneficiary form make it clear who gets the money, assets transferred through a beneficiary designation don’t go through probate– they are available immediately to the recipient.  If you don’t fill out the beneficiary form (and if you don’t have a will), your assets are transferred “by law” which usually means that the heirs will be your parents and/or siblings — perhaps not what you had in mind.

C.  Rich Straight People Really Are Different

When a federally-recognized spouse inherits an IRA, he/she can usually just roll the assets over into his/her own IRA account.  The assets grow tax-free until funds are withdrawn in retirement (or until the heir reaches the age of required minimum distributions, 70 1/2).

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Tags: gay taxes, IRA inheritance, marriage inequality

Gay and lesbian couples who choose to have children often do so later in life.  After all, no children are conceived “accidentally” in LGBT families.  A parent who chooses to stay home to raise the children can take advantage of a great tax break.  It’s difficult to adjust to not having an income, but one upside is that it puts you at a very low — even zero — tax bracket.  If you have a 401(k) from previous employment or a traditional IRA, take advantage of the opportunity to transfer the money into a Roth IRA.  You’ll have to pay income tax on the amount transferred, so be sure to have money on hand to cover the taxes.  Once money is in a Roth, you never have to pay tax on it again.  You don’t have to transfer the entire amount at one time, so if you plan to stay home for the first three years of Junior’s life, you can break up the transfer over the three years — that should help keep you away from the higher tax brackets. Read the rest of this entry »

Tags: gay taxes, IRA conversion, Roth IRA

Financial education is a buzzword tossed around a lot today.  This whole subprime thing wouldn’t have happened if bankers hadn’t been so greedy and prospective mortagors so gullible (or greedy, too, in some cases).

We all need to do a better job of teaching our kids about money management.  The best we can hope for is that they learn from our mistakes.  Let us not repeat this misadventure — though I imagine that someday we’ll create a new one that will inadvertently run afoul.  (Think “Jurrasic Park” meets collateralized debt obligation.)

On this auspicious day, the Fourth Annual Blogging for LGBT Families Day (huzzah! huzzah!), I thought I would write about what it is that LGBT families teach their offspring differently about money than Ward and June Cleaver might have done.  As is usually the case with an us-vs.-them comparison, more is similar than is different.  It doesn’t matter where you’re from, what you look like, or how you define your “family,” we all want our kids to grow up to be happy, successful, and financially responsible adults.  While most things we teach our kids are the same as the Cleaver’s (delayed gratification, how to handle an allowance, how to save up for a big purchase…), my family is a bit different than average. Read the rest of this entry »

Tags: blogging for LGBT families day, financial education, kids

Welcome!

I am now a regular contributing columnist to Queercents, the nation’s leading personal finance blog for the LGBTQ community. Look for my posts there every other Tuesday. Have a look around my personal site, Affine Financial. I hope you’ll find additional tips on financial planning and tax reduction that are useful and perhaps even entertaining. Let me know what you think.

Thanks for stopping by.

Tags: columnist, queercents

Doncha wish that when you finished the exhautive (exhausting?) TurboTax interview that you could just press that enticing “File Return” button, and all would be complete?

Yeah, me too.

Yet every time I think I’m finished, another issue pops up and nags at me to investigate. Read the rest of this entry »

Tags: capital losses carryover, gay taxes, Massachusetts, TurboTax