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Same-sex couples, real estate and the law

same-sex marriage housing laws

same-sex marriage housing lawsSame-sex couples often jump through legal hoops when dealing with their joint  finances — and owning real estate is no exception. Now that the Supreme Court  has struck down the law that defines marriage as the legal union between a man  and a woman, some, but not all, of these obstacles may be removed.

When it comes to owning a house together, gay married couples can expect to  see a few changes now that the Supreme Court has ruled that a part of the  Defense of Marriage Act, or DOMA, is unconstitutional. Those changes will affect  the mortgage interest tax deduction and Veterans Affairs home loans.

The Supreme Court ruling has a harder-to-define effect in the 50 states and  District of Columbia. Each jurisdiction has its own laws regarding the treatment  of same-sex couples, as well as its own laws governing ownership of real  estate.

This article first describes what could happen federally with the mortgage  interest tax deduction and VA loans. Click on the ‘State-by-state’ tab above to  see a map that summarizes how same-sex homeownership is governed in the  states.

Same-sex marriage and the mortgage tax deduction

Married gay couples who have a mortgage together will be able to claim the  mortgage tax deduction jointly now that DOMA has been ruled an unconstitutional  violation of the equal-protection clause. That’s because without DOMA’s federal  definition of marriage, these married couples will be allowed to file federal  tax returns jointly.

Same-sex couples married in states that allow gay marriage have had to file  their federal income taxes separately because DOMA prevented the federal  government from recognizing their marriages.

“If the federal government doesn’t recognize your marriage and you cannot  file jointly — even if, for state purposes, you do file jointly — then one  person is usually claiming the (mortgage) tax deduction, even though in reality  two people are paying for the mortgage,” Gideon Alper, an attorney in Orlando,  Fla., said before the ruling. “Right now, I am taking the mortgage interest  deduction on my property, and my partner is not, even though we are both  contributing to the mortgage payment.”

Two unmarried people who have a joint mortgage can split the mortgage  interest tax deduction as co-borrowers. Say they have $5,000 in interest to  deduct. Each co-borrower could claim $2,500. But splitting the deduction and  filing separately doesn’t always make financial sense to a couple. For example,  the deduction might not be higher than the standard deduction when it is split  in two.

 Same-sex marriage and Veterans Affairs loans

Currently, a service member or veteran married to a person of the same sex  who wants to get a Veterans Affairs loan can’t include his or her partner as a  spouse on the loan. According to federal rules, the definition for spouse  requires the individual to be a “person of the opposite sex.”

They could get a VA loan with a joint loan, but unless both partners are  veterans, the VA would guarantee only the portion of the loan allocable to the  veteran. For example, if the two partners apply for a joint VA loan of $200,000,  the VA guaranty would apply to $100,000. Eliminating DOMA’s definition of  marriage is the first step to allow the same-sex spouse of a veteran to get the  same rights as opposite-sex married couples.

The change is not automatic because in addition to DOMA, Title 38 — which  governs VA benefits — also restricts the definition of spouse to opposite-sex  couples. But now that DOMA has been ruled unconstitutional, Title 38 will likely  go the same way, says Caren Short, an attorney at Southern Poverty Law Center.  She is co-counsel on a federal case challenging both DOMA and Title 38.

“Challenges to Title 38 exist, and they already are in a position to be  decided,” she says. “Courts that have been waiting for (the DOMA) decision will  also find Title 38 unconstitutional.”

Many real estate rules, including title laws, are governed by states, so  rules for same-sex couples who own property together vary by state.

The DOMA case before the Supreme Court focused on whether the federal  government had the right to define marriage as the union between a man and a  woman. The court ruled that DOMA was an unconstitutional violation of the  equal-protection clause in states that recognize same-sex marriage. With this  ruling, existing and future marriages of same-sex couples will be recognized on  a federal level.

The case challenged only Section 3 of DOMA. Another part of the law, Section  2, says that states don’t have to recognize marriages of same-sex couples even  if they are legally married in another state. That section was not the issue  considered by the court. For now, little will change in states that don’t allow  gay marriages.