Home ownership is a complicated road to navigate for any couple, but same sex couples in particular need to be prepared for the processes of purchasing a home. Consult our guide below in order to successfully navigate a way into the house of your dreams in Gilbert, AZ.
Taxes and Joint Property Ownership
Taxes are complex at the best of times, but same sex couples and other members of the LGBT community must be especially careful when it comes to taxes connected to home ownership. The following strategies can help you gain maximum benefits with minimum hassle.
- The ability to deduct mortgage interest is a nice tax break, but who’s going to actually end up taking it is an important discussion every same sex couple who owns property needs to have. Broadly, the choices come down to splitting the deduction equally or having one person take the entire thing. If each person’s income is roughly equal, then division is usually the best path to take, but if one person makes significantly more than the other, letting the high-earning partner deduct the entire amount will often maximize savings on a joint level.
- Did you choose to divide the deduction? Make sure you send your respective halves of the mortgage payment in separate checks. You will both need proof of deductible interest at tax time. On the other hand, if only one of you takes the deduction, make sure that person’s name comes first on the mortgage documents. In all cases, make sure you consult a tax professional specializing in home ownership by same sex couples.
- Transfer taxes can be a nasty surprise, so be prepared. Transfer taxes are incurred by giving your partner (at minimum) a 50 percent stake in a property. Married couples usually don’t have to pay this tax, being considered a single entity as they are, but this provision varies by jurisdiction for other parties. Again, utilizing the services of a CPA or legal counsel specializing in LGBT purchases is key if you don’t want to pay more than what you owe.
- Estate taxes aren’t fun to talk about, but neglecting this facet of home ownership can have far-reaching consequences. The following options represent the best overall estate tax strategies for same sex couples who own or are searching for a home in Gilbert, AZ:
- Joint Tenancy: This is the most popular option for both married, same sex couples and straight, unmarried couples. It specifically mandates a 50/50 ownership of a property between each partner. If for any reason one partner dies, the other will automatically take on sole ownership of the property.
- Tenancy in Common: This can yield certain tax advantages if executed properly. In contrast to a joint tenancy, this tenancy setup allows each partner with a stake in the home to will their share to whomever they wish (like children, for instance), rather than restricting the ownership to a surviving partner.
- Sole Ownership: This specifies one partner as the owner of a property in its entirety. While this can provide many tax advantages for couples with a large income disparity, there is significant danger in using it. A death without a will for example, may leave the unlisted partner with no claim to the home, which means no equity, place to live or real legal recourse. Those considering this option should proceed with caution.
Potential Home Ownership Pitfalls
The matter of who owns what (and how much of it, should shares be an issue), the distribution of property on the event of separation or death, payment obligations in the event of the same, and other such issues are all quite complex for LGBT couples. If not handled in a competent manner or worse yet, ignored altogether, there can be negative ramifications.
The solution to these potential obstacles is an easy one. Same sex couples in a potential or even existing home ownership situation should consult a legal professional specializing in issues pertaining to married or unmarried same sex couples at the earliest opportunity. Only through the drafting and proper filing of an explicit and binding set of documents which set forth the wishes and provisions of each partner are potential obstacles avoided. If everything is filed properly there should be no reason for anything to come into question.
A Prospective LGBT Homeowner’s Guide to Ownership
The best way for LGBT couples to establish a legal relational framework, whether it be in Gilbert, AZ or anywhere else, is to have a lawyer competent in such matters draw up a DPA, or Domestic Partnership Agreement. This agreement will set down the specifics of home ownership and property rights for each partner, and will serve as a binding, non-verbal record of the same. As it happens, the adverse scenarios discussed above – breakups, buy-out situations, untimely death, and so on – and their remedies, are set forth in this document, making sure no one is caught unawares.
Getting a Mortgage as a Same Sex Couple
In the eyes of a mortgage lender and in terms of the actual application and its requirements, an unmarried gay couple is the same as a couple of non-related friends or a married straight couple. One caveat is a VA mortgage: A veteran spouse can bring his or her partner along regardless of that partner’s veteran status; an unmarried pair of applicants must each be veterans to qualify and apply. Regardless of circumstances, pre-approval for a mortgage loan should be the first thing you procure. House-hunting without knowing for sure what you can afford (or can get a loan for) is not a good idea.
What if You’re Already Married?
For LGBT couples, the solidity of their marriage in the eyes of the law is often entirely dependent upon where they live, where they were married, state governments and/or some combination of these factors. As such, the possession of a bulletproof DPA is imperative for every same sex couple, married or not.
Finding a Real Estate Agent
Regardless of location, any prudent LGBT couple should find the best real estate agent specializing in your interests. LGBT real estate represents a niche in the broader spectrum of real estate law and practice, and as such, quality representation is a must. These agents will have a specific knowledge base along with references to lawyers and other experts in the field with similar skill sets.
One Response to “LGBT Home Ownership | Arizona Real Estate”
Thank you for this great article. There are limited resources for tax, finance and real estate professionals with a desire to better serve our LGBT friends, family and community.