Gay Marriage and the Gift Tax

EDITOR’S NOTE:  This article written by Jason Dinesen originally appeared on the One Iowa website on July 6, 2010.  It is being presented on the Dinesen Tax Times for the first time.  The article has been updated to include 2011 numbers.


Because the federal government does not recognize the freedom to marry, same-sex married couples in Iowa could face federal gift tax issues when transferring property to each other.

There is a limit on the dollar amount of gifts you can give another person tax-free: $13,000 per person annually (for 2010 and 2011). This means you can give up to $13,000 to any one person without being required to file a Gift Tax Return.

 Gifts of any size can be given to a spouse without being subject to the gift tax, but until DOMA is repealed, this is not something same-sex married couples can take advantage of.

 For example, let’s say Jill and Joan are married same-sex couple. Joan owns the house they live in, and the title to the house is in Joan’s name only. The house has a fair market value of $100,000. Joan decides to put Jill’s’ name on the title of house. The federal government would consider this a taxable gift of $50,000 from Joan to Jill, and Joan would have to file a Gift Tax Return.

The $13,000 threshold applies both to cash and non-cash gifts, including houses, cars, bank accounts, etc., and applies only to the givers of gifts. Recipients are not subject to tax on gifts received. 

The above discussion also applies to unmarried gay couples and to unmarried straight couples.

Amounts paid to support a same-sex spouse in a state that recognizes same-sex marriage, such as Iowa, are probably not taxable gifts.  I will post more on the topic of support and whether it’s a taxable gift, in a later blog post.