Skip to Content Top

Registered Domestic Partners Move Toward Tax Equality

Guiding You Through Difficult Times

Registered domestic partners (RDPs) in California should beware: Thanks to the IRS, it is now possible to receive the same tax status under federal law as married couples enjoy regarding the reporting of community property income. Although not binding as legal precedent, the ruling is very much consistent with prior U.S. Supreme Court holdings re the taxation of community income. (Poe v. Seaborn (1930) 282 U.S. 10; U.S. v. Malcolm (1931) 282 U.S. 792.)

In its ruling the IRS states that each California RDP must report one-half of all community income received during the partnership on his or her federal income tax return. This has been the case under California state law, but the IRS did not previously extend community property principles to income earned by RDPs. The ruling further iterates that if an RDP earns income during the partnership, each partner will be required to report one-half of that income in his or her taxes beginning with the 2010 tax year. RDPs retain the option to file amended returns consistent with the ruling report for the tax years of 2007 to 2009, but they are not required to do so.

California law recognizes that registered domestic partners have the same rights and obligations under the law as spouses. So the IRS stance makes sense. As of January 1, 2007, California also began to treat earned income of RDPs as community property for state income tax purposes. Couples can register as RDPs in California if both partners are the same sex, or for opposite sex partners if at least one of them is 62 years of age. The ruling is limited to California RDPs, but could be applied to RDPs of any other state that extends its community property laws to RDP’s in the same manner as California.

Registered Domestic partners must continue to file as separate taxpayers on their federal income tax returns, since federal rules do not allow RDPs to file as “married filing jointly.” There are reduced federal tax rates for spouses who file separately. So, although RDPs cannot file jointly, they are not penalized for filing separately.

Many questions remain under federal law relating to registered domestic partners. That’s why it’s important to consult with a CPA before filing in this manner.

Share To: