As of October, 2014, it is legal for same sex couples to marry in 32 states. For those who can legally marry, the calculation of estate taxes when a spouse dies and the amount of capital gain taxes that are exempt from taxes when you sell a home may be affected. Following are some of the ways that marriage can affect you.
Tenancy in the Entirety
Tenancy in the entirety is a way of holding title to your home that is only available to married couples. In states that allow this designation, it means that each of you own 100 percent of the home and have equal right to access. The home cannot be sold or transferred to anyone else without both spouses agreement. When one spouse dies, the surviving spouse automatically becomes the sole owner. In that case, there is a federal unlimited deduction for marital couples, meaning that there will be no federal gift tax triggered by the transfer of ownership.
Capital Gains Taxes
If you own a home by tenancy in the entirety and you sell your home, you are entitled to an exclusion from capital gains, even if only one of your names is on the home. Capital gains is the difference between the money you have invested into the home and the amount that it is sold for. Some conditions apply, such as number of years you lived in the home.
It is important to note that, because of the Defense of Marriage Act, DOMA, 2013 ruling that overturned the section that required same sex spouses to be treated as unmarried for federal law purposes, the federal capital gains exemption applies to same sex married couples as well as heterosexual couples. It applies regardless of whether you live in a state that prohibits such marriages if you were married in a state that legally recognizes same sex marriages,
Real Estate Mortgage Deduction
Before DOMA, same sex married couples who jointly owned their home were required to file separate federal tax returns and either split the deduction between them or only one partner take the deduction. In addition, each partner had to qualify separately for the deduction. Since DOMA, same sex spouses can now file jointly for the larger deduction afforded to married couples.
Purchasing or Selling a Home
Since state laws vary and there are different qualifications that must be met under federal law, you should contact a local LGBT attorney regarding any questions that you may have.
If you are in the market to sell or purchase a home or purchase a new one, hiring an LGBT real estate agent at GayRealEstate.com would be in your best interests. He or she will be in a position to know the current laws affecting the LGBT community and can assist you throughout the process.