Tuesday, October 26, 2010
Lambda Legal has released a short guide aimed at tax professionals and California's registered domestic partners explaining the consequences of a significant shift in federal tax policy as they file their tax returns for 2010.
The change, announced earlier this year by the Internal Revenue Service, applies to California's registered domestic partners (RDPs) and also may apply to the state's estimated 18,000 legally married same-sex couples, as well as registered domestic partners in Nevada and Washington. In a change from the approach taken by the Bush Administration, the IRS will now recognize the jointly owned community property income earned by California RDPs, the same way it long has done for different-sex married couples who file separate federal income tax returns. Recognition of "community income" means couples each will report half of their combined income on their separate returns -- called "income-splitting" -- which can mean big savings for couples with wide disparities in income.