In perhaps the most unexpected unintended consequence of gay marriage becoming legal in New Jersey, the law will also help same-sex couples looking to separate get more out of that all too frequent byproduct of divorce: alimony.
Stacey Cozewith, a partner with Snyder & Sarno in New Jersey, explains this stems purely from a federal tax perspective.
Before the state of New Jersey legalized gay marriage in October, same-sex couples could unite only under the umbrella of a civil union, Cozewith said. That awarded them some, but not all, the benefits awarded to their opposite-sex counterparts.
One area where they were left out in the cold? The federal tax perks that come with alimony.
With alimony allocated after the end of a traditional marriage, the payments are tax deductible for the person paying and are considered taxable income for the person receiving, Cozewith said.
But if couples in a civil union were to separate in New Jersey under the old state law, alimony payments could instead be deemed a gift to the person receiving them and therefore be subject to much higher taxes under federal law.
“At the end of the day, both parties lose out because there’s not as much money around,” Cozewith explained.
After the Supreme Court struck down the Defense of Marriage Act earlier this year, the federal government was forced to recognize the legitimacy of gay couples married in states where it was legal to do so.
So to avoid those tax penalties, Cozewith said she and other partners in her firm often advised couples looking to split to visit a state where gay marriage was legal and get married. Then they could come back to New Jersey and divorce, dealing with alimony the way every other married couple always had.
“Certainly, it has to be very psychologically difficult,” Cozewith said.