On Tuesday, June 26, 2013, the Supreme Court ruled in two cases regarding same-sex marriages.
These two rulings will impact how married couples of the same gender will file their income taxes and estate taxes. Just what the impacts will be: this is something we'll be figuring out over the next few months.
Summary of the Cases:
"In United States v. Windsor, the Court held that Section 3 of the Defense of Marriage Act, which excluded same-sex unions from the federal definition of marriage, is an unconstitutional deprivation of the equal liberty of persons protected by the Fifth Amendment." (SCOTUSblog, "Evening Round-up of News on Today's Opinions")
"In Hollingsworth v. Perry, the Court decided that the proponents of California's ban on same-sex marriage did not have standing to appeal the district court's order overturning the ban." Thereby, California Proposition 8, which banned same-sex marriage, is overturned. California may resume issuing marriage licenses once the judicial injunction against issuing marriage licenses to same-sex couples is lifted. (Also from SCOTUSblog, "Evening Round-up of News on Today's Opinions")
Tax Implications of these Supreme Court decisions:
Legally married same-sex couples may* now be able to file federal income tax returns as married rather than as unmarried. They may be able to amend previously filed tax returns to change their filing status and to recalculate their tax. Generally speaking, amended federal returns can be filed for any years still open under the three-year statute of limitations on refunds. However, refunds could be claimed on older years if the couple previously filed a protective claim to keep the statute of limitations open.
Same-sex married couples may* now be eligible for the marital deduction for federal estate taxes. They may be able to amend previously filed estate tax returns to have the marital deduction apply.
Same-sex married couples may* now be eligible for federal tax benefits previously available only to opposite-sex married couples, such as tax-free health insurance benefits.
Same-sex couples may* now be eligible for other federal benefits, such as spousal Social Security benefits.
* When I say "may" in the previous sentences, here's what's going on. There seems to be a question of whether gay and lesbian spouses can file as married if they reside in a state that does not recognize same-sex marriages. It's not particularly clear at this point what the answer is. What is clear to me: gay and lesbian spouses can file as married if they live in a state that recognizes their marriage. This is because marital status for federal tax purposes is determined by the states.
What We Don't Yet Know
I expect that the Internal Revenue Service will issue guidance on a range of federal tax issues. In particular, I expect the IRS to issue the following types of guidance:
whether there will be standardized procedures for filing amended returns and processing previously filed protective claims;whether there will be standardized procedures for seeking refunds of income tax and payroll taxes on employee benefits for same-sex couples; andwhether all same-sex married couples will be permitted to file as married on their federal tax return, or whether this applies only to couples residing in those states that recognize same-sex marriage.Further, the IRS will need to reprogram their computer systems to allow for gay and lesbian couples to file as married. Currently, the IRS's computer systems reject tax returns where both spouses have the same gender.
Here's some related articles on the subject of taxes for gay and lesbian married couples.
