How Gay Couples Can Save On Taxes: Have One Partner Hire The Other As A Nanny

If you’re a masochist who still hasn’t filed her taxes, great news! I’ve found a wonderful money-saving tip for you and your wife. As we all know, thanks to DOMA the IRS doesn’t let gays — whether married or otherwise — file jointly. This is costly! But there is a solution: simply hire each other as your kids’ nanny.

The New York Times looks at Michigan’s Amanda and Kay Shelton, who in addition to worrying about legal guardianship of their two kids also have to fend off Uncle Sam’s onerous taxation scheme while saving for retirement. Time to hatch a sneaky plan to fool the government. Legally!

If the Sheltons could file their federal returns jointly, they would save several thousand dollars in taxes. Instead, Amanda files her federal tax return as “head of household,” and claims the children and Kay as dependents. Tax rates are higher for people who file as head of household compared with couples who file jointly, so they end up paying at least $3,000 more, according to Tina Salandra, an accountant and president of Numerical L.L.C. But they could do something that would help Kay save for retirement: Amanda could hire Kay as a nanny and pay her $3,649 a year, which she could then put into a Roth I.R.A. (Kay needs to earn less than $3,650 for Amanda to continue to claim her as a dependent, Ms. Salandra said.) Kay and Amanda would both owe Social Security and Medicare taxes, and Amanda would need to pay state unemployment taxes. That’s roughly $644 in total, but Amanda could deduct her share of the payroll taxes as itemized deductions on her return.

Somehow, after reading the U.S. tax code’s 3.4 million words, this little hack never dawned on me. [photo via]

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  • Kurt

    Gay marriage is largely a fraud. There may be some individual cases but for 90% of gays, they are better off tax wise by not being married.

  • justiceontherocks

    @Kurt: Do you mean that marriage is largely a fraud?

  • Paul F

    @justiceontherocks: Only if you’re a republican congressman.

  • Riker

    @Paul F: Funny how you have a selective memory for infidelity scandals. Bill Clinton ring a bell? How about John Edwards?

  • JusticeontheRocks

    @Riker: re: Clinton. Old Southern Baptist rule: it’s not cheating if you have one foot on the floor.

  • Soupy

    I don’t think that you can beat Newt Gingrich for serial adultery. He left his first wife for his mistress when she was in the hospital for cancer treatment (and over the phone!). Second wife, well she just got cheated on and left. But even Clinton and Edwards didn’t have the temerity (balls?) to attribute his adultery to his “passion for his country” and qualify that he was “right with God”.

  • Kurt

    @justiceontherocks: No, I mean gay marriage. Most gays would pay more taxes if married. Most straights would not (though a large minority do).

  • justiceontherocks

    @Kurt: depending on how they have their financial lives set up. But there would be a big savings on estate taxes.

    I agree it’s not always the right decision financially, but people should have the choice.

  • Armand

    How can a gay person do this?

    Isn’t this what mother always described as lying?

  • unclemike

    @Kurt: Most gays don’t want marriage just for the taxes. Most gays want marriage for the 1200 or so other rights that automatically come with.

  • Riker

    @Armand: The thinking is that if Uncle Sam won’t let us get married, we are allowed to cheat the system in other ways.

    This thinking is wrong, mind you (it is almost never okay to cheat your fellow citizens) but that is how they rationalize it.

  • Kurt

    @justiceontherocks: 99.5% of gay couples will never pay estate taxes.

Comments are closed.