12:20pm | The Internal Revenue Service ruled on May 28 that same-sex domestic partners will be treated the same as heterosexual couples under a new California law when filing of their income with the federal government.
According to the Wall Street Journal in this article: 58,000 couples who are registered as domestic partners in California must combine their income and each report half of it on their separate tax returns. Same-sex couples account for an estimated 95% of the state’s domestic partnerships; partnership status is also available to heterosexual couples in which one partner is over age 62…
…But the tax issue is more complicated in California, one of nine states with community-property rules. Those rules require married couples to treat all income as joint property for a variety of purposes. If they are filing taxes separately, the Supreme Court has said they must combine their incomes together and then divide the sum equally.
Specifically, the IRS ruled:
1.Taxpayer must report on (their) individual federal income tax return one-half of the combined income that the Taxpayer and Domestic Partner earn from the performance of personal services and one-half of the combined income derived from their community property assets.
2. Taxpayer is entitled to half of the credits for income tax withholding from the wages of Taxpayer and Domestic Partner.
3. The requirement under California law to treat Taxpayer’s earnings as community property, and thus half of Taxpayer’s earnings as vested in (their) partner, does not result in a transfer of property by Taxpayer to (their) partner for federal gift tax purposes under § 2501 of the Code.
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