On June 26th, the United States Supreme Court issued a ruling in the matter of United States v. Windsor. The basis of this case was in tax – Windsor was the executor of the estate of Thea Spyer, as well as Spyer’s wife. When Spyer passed away she left her interest in the couple’s assets, including an apartment on New York’s 5th Avenue, and a country home in the Hamptons, to Windsor. Since they were a same-sex couple, the Federal Defense of Marriage Act (DOMA) didn’t see them as spouses, and that meant the tax court didn’t either. Windsor paid nearly $364,000 of Federal estate taxes on her inheritance, filed for a refund, and eventually filed suit against the IRS.
The Supreme Court struck down DOMA as unconstitutional, which has led to a flurry of changes for those same-sex couples that are legally married. The following is a brief overview of the tax impacts we’ve seen so far.
- The IRS will recognize marriages in the “state of celebration”, which means that couples that get married in a state or foreign country that allows for same sex marriage will be treated as married for federal tax purposes, even if they move to a state where same sex marriage is not legal.
- If the couple lives in a state where same-sex marriage is not legal, they will likely have to prepare two sets of tax returns: one federal using a joint status, and two state returns, using the proper individual status.
- Same-sex couples will be treated as married for income, gift, and estate taxes. Specifically, the ruling applies to all federal tax provisions where marriage is a factor, including filing status, claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA and claiming the earned income tax credit or child tax credit.
- Legally married same sex couples have several filing requirements and options to keep in mind.
- Those that file an original tax return on or after 9/16/13 are required to use either married filing joint (MFJ) or married filing separately (MFS)
- Those who filed individual returns prior to 9/16/13 are allowed, but not required, to amend their federal tax returns to use the MFJ or MFS filing statuses. This is available for all “open years” which is generally 3 years from the date the return was filed, which means some may be able to amend their returns to MFJ or MFS back through their 2010 tax returns.
- Note: once a return has been filed with (or amended to use) a MFJ or MFS filing status, it cannot be separated in the future. The decision on how to treat the returns filed prior to 9/16/13 is one that should be approached carefully and with advice from a tax professional.
Additional guidance is coming out on a weekly basis, so stay tuned as the story continues to unfold.
