There’s an ongoing debate about whether the U.S. tax code helps or harms married couples. Truth is, when it comes to income taxes, it does both; under 2010 tax law, some couples pay more tax than they would if they weren’t married and some pay less.

The real tax advantage to marriage, however, comes at times when assets are being transferred. For example, it’s pretty well known that gay couples who can’t marry are disadvantaged when it comes to estate taxes. You can pass any amount of assets to a spouse tax free. But under current law, when the temporarily moribund federal estate tax returns on Jan. 1, 2011, only $1 million will be able to be left to non-spouse heirs without being clipped by a 55% tax. (If Democrats and Republicans can reach an estate tax deal, that $1 million will likely go to at least $3.5 million. Still, the point remains that unmarried couples are disadvantaged when it comes to both federal and state estate taxes.)

In an intriguing new Forbes column, tax lawyer Robert W. Wood points out another, little discussed occasion when long-time couples who aren’t married may suffer a big tax penalty: when they split up. All sorts of asset transfers are tax free when they take place in connection with the dissolution of a marriage. Even 401(k)s can be split without tax. But gay partners who have lived together for years could end up with a big tax bill when they try to disentangle their financial affairs – for example when a jointly purchase house is transferred into one partner’s name.

Full Story from Forbes

Click here for gay marriage resources.

To subscribe to this blog, use the rss feed on the right, or use the form at right to join our email list. You can also email us at info@purpleunions.com. Or find us on Facebook – just search for Gay Marriage Watch (you’ll see our b/w wedding pic overlooking the Ferry Building and Bay Bridge in SF). We’re also tweeting daily at http://www.twitter.com/gaymarriagewatc.