As marriage debate simmers, taxes complicated for same sex couples

Eric and Andrew Ellingsen
Eric Ellingsen, left, and Andrew Ellingsen, formerly of Apple Valley, Minn., married in Iowa in 2009 and moved there in July 2010. They filed their 2011 taxes as a married couple in Iowa, but as singles in Minnesota and with the IRS. Minnesota and the federal government do not recognize same sex marriage.
Courtesy of Eric Ellingsen

For the first time in their seven years together, Eric and Andrew Ellingsen were able to file a joint tax return this year.

Until last year, the Ellingsens lived in Apple Valley, Minn., where they filed two single returns, and could not have filed as a couple. Minnesota already has a law banning same-sex marriage and this fall, voters will decide whether the state's constitution should be amended to reinforce it.

After Iowa legalized same-sex marriage in 2009, the Ellingsens returned to Decorah, where they attended Luther College, to marry. Their move to Iowa the following year allowed them to note their marital status on their tax forms — at least for part of the year.

The Ellingsens moved to Iowa after Eric, who sang with the group Cantus, landed a job with the Luther College Music Department. Andrew, who is also a musician, found a job as an elementary school teacher.

Create a More Connected Minnesota

MPR News is your trusted resource for the news you need. With your support, MPR News brings accessible, courageous journalism and authentic conversation to everyone - free of paywalls and barriers. Your gift makes a difference.

Filing federal and state taxes can be complicated for many people. But for the Ellingsens, tax time was particularly tricky because they lived in Minnesota the first half of 2011.

For their state taxes, they filed as two single people in Minnesota and as a couple in Iowa. On their federal tax returns they filed as individuals but also needed to prepare a joint return because state returns required them to copy information from the federal return.

"So we actually have to have the federal taxes prepared three different ways," Andrew Ellingsen said.

It soon became clear that this wasn't a year for do-it-yourself tax returns, Andrew Ellingsen said.

"It was one of those things where Turbo Tax wasn't going to be able to handle this kind of finesse this year," he said.

But filing a joint return would not necessarily benefit all gay couples, just as it isn't the answer for all unmarried heterosexual couples said St. Louis Park tax accountant Mike Cassidy, of ROR Tax Professionals.

"If you have two income earners, and they're substantially similar in their income, they're likely going to pay less tax" by filing separately, Cassidy said. "Whereas if we have a single earner, or if there's a very large disparity in income, they're going to pay a much higher tax rate than their married peers."

In Minnesota, a Senate tax bill in conference committee at the state Capitol would reduce the penalty that affects some married couples.

Because gay couples in Minnesota cannot marry, they have to work out tax questions concerning any children or shared property, Cassidy said.

The rules are not as clear-cut as those for married couples that file a joint return, as the tax code isn't necessarily designed with non-traditional families in mind. But businesses have tried to offer benefit packages to address them, said Jeff Cairns, a Minneapolis attorney for Leonard, Street and Deinard who specializes in benefits.

Cairns works with private employers, many of whom offer benefits to the unmarried partners of their employees.

"I've noticed especially with respect to health coverage, employers have voluntarily agreed to modify their plan designs to allow domestic partners to be covered under their group health plans as a symbol of their inclusiveness plus employers have adopted very specific diversity initiatives," he said.

One key difference is that health benefits for spouses aren't taxable. Domestic partners, unless they are dependents, have to pay taxes on that benefit.

Andrew and Eric Ellingsen say they they've been lucky in that respect. Both have been able to obtain health insurance through their employers.

Although marriage does provide tax benefits, taxes are usually pretty far down most people's lists as reasons to marry.

For the Ellingsens, marriage has made filing their taxes a little more complicated, given the six returns their accountant had to prepare this year. But being able to file a joint return means something to them.

"We're part of the journey to make it a better America, but it is sort of unfortunate that it has to take all this extra paperwork," Eric Ellingsen said.

According to the last census, there are nearly 14,000 same-sex couples living in Minnesota.