In June, the Supreme Court struck down provisions of the
Defense of Marriage Act denying same-sex couples federal
recognition of their marital status. Yet for those in same-sex
marriages, the tax impact of the Supreme Court ruling remained
unclear, as the IRS said it would have to work with the Treasury
Department and other government agencies to provide future
Source: Wikimedia Commons.
Same-sex spouses got that guidance earlier this week, with
Treasury Secretary Jack Lew announcing that the IRS would
recognize same-sex marriages for federal tax purposes regardless
of their state of residence. Let's take a look at some of the
implications of the new IRS policy with an eye toward the
elements that same-sex spouses will benefit from the most.
1. Same-sex spouses with unequal incomes are likely to
get a marriage bonus.
Federal tax law treats married couples differently from single
filers. Although you might think that it would be appropriate for
items like tax brackets, standard deductions, and income
threshold limits for married couples simply to be double the
corresponding amounts for single filers, the actual numbers are a
lot more complicated. In general, couples in which one person
earns the bulk of the income are most likely to reduce their
overall tax burden by getting married, and the IRS ruling will
allow same-sex spouses in that situation to do so. With many
different factors to consider, including the Earned Income Tax
Credit, the Alternative Minimum Tax, and other more specialized
deductions and credits, it's hard to make valid generalizations,
but many same-sex spouses will benefit from the change in filing
2. Same-sex spouses will gain access to benefits
available only to married couples.
Married couples also get some special benefits for tax purposes.
The issue involved in the Supreme Court case actually involved
the deduction for estate taxes that's available to married
couples but not to single individuals, whereby same-sex spouses
can leave unlimited bequests in their wills to each other without
fear of paying estate tax. Similar provisions apply for gifts
made during one's lifetime.
Another key provision involves taxation of employer-provided
health-insurance benefits. Under prior law, those who were
covered under health benefits that their same-sex spouses got
from their employers had to include the value of those benefits
as taxable income, unlike opposite-sex married couples. The rule
change gives same-sex spouses the same exemption as other married
3. Same-sex spouses have the choice, but not the
obligation, to amend past-year returns back to 2010.
One particularly helpful aspect of the decision is that same-sex
couples who married in past years can amend old returns to reap
any benefits of joint-filing status. Most couples will be able to
go back three years to amend. But unlike current and future
years, in which same-sex spouses will
to treat themselves as married for tax purposes, the IRS gives
to amend past-year returns. Therefore, those same-sex spouses for
whom filing as a married couple provides extra benefits will be
able to get additional refunds, while those who would pay more
don't have to pay the added cost for previous years. That's a
win-win scenario for all same-sex spouses.
Winners and losers
As with any tax law change, some taxpayers will benefit from the
same-sex marriage decision and others will get hurt financially.
What the ruling does, though, is to put same-sex couples in the
same position to consider the tax ramifications of marrying that
their opposite-sex-couple counterparts have had to deal with all
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