Submitted by: Diane Kennedy, CPA
Categories: Human Resources & Diversity
Posted: May 28, 2002 – 12:00 AM EST
May 28 /CSRwire/ - PHOENIX, Arizona - "Plenty of tax benefits are available for same sex domestic partners," says Tax Strategist Diane Kennedy, CPA, author of the best-seller "Loopholes of the Rich: How the Rich Legally Make More Money and Pay Less Tax."
"Failure to take advantage of these tax 'gifts from the IRS' meant for same sex couples that result from government incentives to help the economy is a huge oversight on their part!" she adds.
"Domestic partners who can save a considerable amount of taxes personally, as well as collectively as an influential citizen block," said Kennedy.
According to U.S. Census data, in the year 2000 there were nearly 600,000 domestic partnership households. Only a small percentage of them seek out the significant tax break that activists have long fought so hard for. There are approximately 15 million gay people in the United States with a buying power of $450 billion, according to a report from Harris Interactive, Witeck-Combs and the Selig Center for Economic Growth at the University of Georgia.
Kennedy is a nationally recognized authority on managing taxes to ensure a better, less stressful and more secure financial life. In her research, she has identified the gay market as one that is clearly not claiming what they are due.
According to Kennedy, a domestic partnership provides a lower tax rate by taking advantage of two tax rate tables. To illustrate her theory:
Periodically, there is a lot of press about the "marriage tax penalty." This is a very real issue for married couples as they find that their combined income pushes their "marginal tax" rate to a higher level. For example, two single people earning $26,000 each would have the first "income layer" (up to $6,000) taxed at 10%, and the next layer (above $6,000 up to $27,950) taxed at 15% However, once they are married, their joint income is taxed for only one of the 10% layer and one of 15% layer. Each additional dollar for the single taxpayer would cost them 15% while each additional dollar for the married taxpayer costs 27%!
A taxpayer is allowed either an itemized or a standard deduction. In the case of a married couple, they can only elect one or other. If they file using "married, filing separately" status, there are even more penalties.
A domestic partnership can take advantage of both deductions by allowing one partner to take the full mortgage interest and property deduction and having the second partner take advantage of the standard deduction.
This means more write-offs and less tax!
Tax Strategies for Domestic Partners
There are also unique benefits only available to domestic partners. Here's one strategy used by Alec Tanner, Mortgage Broker with Keystone Mortgage in Phoenix, Arizona.
In addition to his mortgage brokerage business, Alec is a successful real estate investor - buying houses, rehabbing and selling at a profit. By investing with his partner, he is able to take advantage of twice the borrowing capacity. Plus, he can sell the fixed up property (bought in his name) to his partner at the new fair market value and take out the cash difference at the lower capital gains rate. If the fixed up property happened to be his principal residence that he had lived in for two of the previous five years, he wouldn't even have to pay tax on the gain. He'd get the cash out, tax free, and his partner would have a great future rental.
If non-traditional partners ever needed another reason to avoid being average, consider this. The average 50-year-old American taxpayer has no net worth. This means that the average 50-year-old has worked for 25 to 30 years and, as a result of that hard work, accumulated nothing. What happens 15 years later, at retirement age? With declining health, reduced energy and a bleak future, they look at the remaining years of their lives, and study their dwindling resources as they see their future stretching into hopelessness. With this as the result, who wants to be average?
The statistics are against those who want to be average. Find ways to change thoughts about income, and taxes, if different results are the goal!
Diane Kennedy, CPA-Tax Strategist, author of Loopholes of the Rich: How the Rich Legally Make More Money & Pay Less Tax, is a congressional consultant, educator and a member of Robert Kiyosaki's best-selling Rich Dad's Advisor team. Diane's credo is "it's not how much money you make but rather, how you make your money." Kennedy takes complicated tax strategies and turns them into easy-to-apply tax savings tips for everyone, including small business owners, entrepreneurs, independent consultants and corporate employees interested in developing a sideline business. Tax tips and other educational tax materials are available at www.legaltaxloopholes.com.