The Gay Divorce Tax
Melissa Etheridge recently made headlines with her break up from Tammy Lynn Michaels, saying “I’m for gay marriage, because I’m for gay divorce” while on the Joy Behar Show. Etheridge reveals that she had to pay twice as much to end her relationship – a domestic partnership – because of tax issues and legal problems facing some same-sex couples. This is one high-profile example of what I call the “Gay Divorce Tax,” which could affect anyone ending a civil union, domestic partnership, or gay marriage.
While I’m sure splitting a lifetime of assets is painful enough, did you know that generally speaking, the process of divorce is not taxable for straight couples? On the other hand, gay couples could face all the “fun” of a traditional divorce while also getting hit with taxes.
The issues involved here are very complex, and often guidelines from the IRS are somewhat unclear. These issues and complexities could make it hard for same-sex couples to find lawyers, financial planners, and accountants who are up to date on the ever-changing rules, laws, tax statutes and more. I’ve seen people make important (and expensive) decisions based on bad or incorrect information.