Here are some answers to frequently asked questions relating to the tax consequences for individuals participating in a same-sex marriage.
*When are individuals of the same sex lawfully married for federal tax purposes?
For federal tax purposes, state or foreign law determines whether individuals are married.
*Can same-sex spouses file federal tax returns using a married filing jointly or married filing separately status? Yes.
- For tax year 2013 and going forward, same-sex spouses generally must file using a married filing separately or jointly filing status.
Many taxpayers overlook the long list of deductions that they may take when completing and filing their tax returns. The IRS has estimated that millions of taxpayers overpay their taxes each year mainly because they fail to avail themselves of all of the possible deductions. The tax professionals at the Thorgood Law Firm can help ensure that all taxpayers take advantage of any and all deductions that may apply to them. Here is the sixth part of our multi-part series of blogs on the most overlooked tax deductions:
COLLEGE TUITION & LOAN DEDUCTIONS
The American Opportunity Credit
All of us as taxpayers continually think we have a lot of expenses that we can itemize and deduct to help reduce our respective tax bills. But they come, they go, all for naught and no effect. The problem usually arises from the fact that our costs regularly fall just short of the required income thresholds for some categories of deductions. One solution is “bunching expenses,” which is a term used to describe incurring as many expenses as possible in a particular category during a particular tax year. Of course, doing this in one tax year will usually significantly diminish any chance of repeating it the following year.
What can taxpayers deduct from their mortgage payments? What portion of a payment consisting of principal, interest, taxes and insurance, if any, is deductible? To deduct the expenses of owning a home, at least those costs paid in your mortgage payment, taxpayers must first itemize deductions.
Simply put, interest paid on a mortgage is tax deductible. Points that are paid to lower the interest rate are also deductible. Taxpayers can deduct the interest paid on first and second mortgages up to $1,000,000 in mortgage debt (the limit is $500,000 if married and filing separately). Any interest paid on first or second mortgages over this amount is not tax deductible. If the loan is not a secured debt on your home, it is considered a personal loan, and the interest you pay generally isn’t deductible.
Unless Congress avoids the Fiscal Cliff, we will have a return of the so-called Marriage Penalty, resulting in higher taxes for many couples 2013.
Prior to the Bush tax cuts, there was a indeed a “penalty” against married couples under the tax code, as their standard deduction and income tax brackets were less than twice those of singles. In essence, married couples were paying higher taxes than their non-married counterparts.
When Congress passed the Bush tax cuts, however, they corrected the imbalance by, among others, giving married couples a standard deduction that’s exactly twice that of individuals. They also established income ranges for the 10% and 15% tax brackets to be exactly double that given to individual taxpayers.