Though same-sex marriage is now the law of the land, true parity in many areas is not. When it comes to the purchase of a home, LGBT couples need to be mindful of these and plan accordingly when seeking or closing on a home. First and foremost, we need to be cognizant of the current laws when we enter the marketplace.
The Fair Housing Act of 1968 prohibits discrimination in the sale, rental and financing of housing based on many criteria, but sexual orientation or gender identity is not included. There is no federal law, therefore, barring discrimination. When it comes to grantees of HUD programs, a 2011 rule requires compliance with local and state non-discrimination laws protecting LGBT individuals and couples.
Seventeen states prohibit housing discrimination based on sexual orientation and gender identity: California, Colorado, Delaware, District of Columbia, Hawaii, Illinois, Iowa, Maine, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, Oregon, Rhode Island, Vermont and Washington. You may be wondering why New York is not on this list; it is because New York and three other states – Maryland, New Hampshire and Wisconsin only prohibit discrimination based on sexual orientation, not gender identity.
Alas, this still leaves 30 states lagging behind.
We do see changes in public perception and acceptance of same-sex couples, and true equality looks favorable in the years ahead. But LGBT buyers may presently face discrimination by home sellers, and other related parties like insurance companies, who have been known to reject claims of so called unrelated persons.
We also know that tax laws have not caught up with prevailing values, and LGBT couples do not currently enjoy the identical tax benefits of heterosexual couples. Many of these are pertinent to home ownership.
Same-sex couples must decide, for instance, who should avail themselves of the mortgage tax deduction as they are now required to file separately. Partners can decide that one member take the full deduction or that the deduction be divided. Economics should decide this question based on which person will result in a greater tax savings. Experts suggest that if the deduction is divided, it’s a good idea to make payments by two separate checks.
Partners also need to decide in what manner to hold title as this will affect future estate tax liabilities and rights of survivorship. The best protections come with what is referred to as joint tenancy, where partners share ownership and when one dies, the other automatically assumes sole ownership. If each partner has descendants they wish to leave their property to, they may choose to be tenants in common, so their share may pass directly to them. This may pose difficulties for the partner, and should be discussed in detail before decisions are made.
In addition to income taxes, there are transfer tax and estate tax issues that relate to same-sex couples that should be entertained. An individual deciding to add his partner to a deed, for instance, may result in a transfer tax. This would not be the case for a heterosexual couple. It is wise to consult a financial adviser who is familiar with taxes as they pertain to LGBT individuals.
The fact that full acceptance has not yet fully been enshrined in law should not prevent same-sex couples from buying homes and enjoying all the benefits and pleasures home ownership affords. Just get good and specific advice before you make decisions.
