I Now Pronounce You…Domestic Partners

by Administrator 12. July 2010 10:39
Beginning December 3, 2009, Washington state began treating registered domestic partners the same as married spouses.  Domestic partnerships are available to same-sex couples and to opposite-sex couples where one partner is at least 62 years old.  While the new law undoubtedly will make things simpler for these couples, it also creates the potential for confusion when dealing with federal tax matters.

If you are in a domestic partnership, you need to be aware that the federal government does not recognize state-sanctioned domestic partnerships.  Therefore:
  • You cannot file your federal income tax as “married” (either filing jointly or separately).  You must continue to file as a single taxpayer.
  • If your employer provides health insurance for your domestic partner and pays a portion of the premium, you must declare that amount as income on your tax return.  (For married spouses, the premium payments are not considered income.)
  • If you have children in your household and the non-biological parent has not adopted them, that parent cannot count them for the earned income tax credit, head of household status, or child tax credit.
  • Domestic partners cannot take advantage of the higher limits for excluding gain on the sale of your principal residence that are available to married couples.
  • When one partner dies, there is no federal estate tax exemption for property transferred to the surviving partner.  Similarly, any remaining balance in a retirement plan cannot be transferred (tax-free) directly to the surviving partner’s retirement account.
These differences in tax treatment mean that domestic partners require careful tax and estate planning that is specific to their situation.  For more information, please contact us.

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