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Same-Sex Couples: How to File California Tax Return

Options and issues for gay couples filing their California tax returns

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California treats same-sex married couples and registered domestic partners (RDPs) the same as different-sex married couples. Same-sex married/RDP couples in California can choose to file as married/RDP filing jointly or married/RDP filing separately.

See which states allow gay couples to file jointly

Community Property Rules Apply to Same-Sex Couples

California is one of three community property states that also recognize same-sex marriages. Therefore, same-sex married couples and RDPs in California have to follow community property rules when filing their California tax returns.  The IRS also requires that same-sex married/RDP couples in California use community property rules to prepare their federal tax returns as well.  This new rule is effective for 2011 federal tax returns, but California couples have the option of amending their returns back to 2007 to reflect these new rules.

Same-Sex Couples Using Married Filing Separate Status 

Same-sex married couples can choose to file their California returns using either the married filing jointly status or the married filing separately status. Those who choose to file separately would generally follow the same community property rules for dividing community income and community deductions as they did on their federal returns.

Generally, any income that is derived from wages, salaries, or other pay earned in a community property state is community income. Any income derived from community property is also community income.  This community income is split evenly between the two spouses' separate California returns.

Any separate income, such as investment income, pensions, and separate gifts or inheritances, is claimed in full by each spouse on their own separate return.  The state has provided detailed guidelines on the married filing separately status in FTB Publication 1051A.

Same-Sex Couples Filing Jointly

Update: Same-sex married couples are allowed to file a joint federal return following the Supreme Court decision in United States v. Windsor, which struck down section 3 of the Defense of Marriage Act as unconstitutional. Same-sex married couples can also choose to file separate returns using the married-filing separately status. If separate returns are filed, each spouse will need to measure their income and deductions using community property rules.

Registered Domestic Partners File as Unmarried

Registered domestic partners will continue to file tax returns as unmarried persons, using the single filing status for example. Community property laws apply to registered domestic partners just as they apply to married couples in California. Accordingly, domestic partners will need to measure their income and deductions using the community property rules. Domestic partners are permitted to file jointly in California, and this makes tax time even more complicated for domestic partners in California. California domestic partners will need to prepare a "dummy" federal return as if they were married in order to measure their income and deductions for their joint California return. This dummy federal return would not be filed with the IRS, but would be used as the starting point for preparing their joint California return. This is necessary because some items on the California state return depend on federal adjusted gross income (AGI) and other calculations on the federal return.

The California return would mostly follow this dummy federal return, with one major adjustment.

California Adjustment for Medical Insurance for Registered Domestic Partners

Many employers have extended medical insurance benefits to registered domestic partners. California treats this medical coverage differently than the IRS does, which creates the need for an adjustment when preparing the California joint return.

This adjustment is needed if one partner receives medical insurance from their employer which covers both them and the other spouse. The value of the insurance benefits are taxable income on the federal return of the non-employee spouse receiving the coverage.  However, this is not taxable income in California.

Therefore, these couples would need to subtract this amount from their income when preparing their California return. Same-sex couples would need to make this adjustment on their California returns whether using married filing jointly or married filing separately status.

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  6. California Taxes for Gay Couples - How to File a California Tax Return

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