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IRS to Recognize Same-Sex Marriages for Federal Tax Purposes

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In case you missed it, there was a big announcement from the IRS on gay marriages last week, as a result of the landmark U.S. Supreme Court striking down parts of the Defense of Marriage Act as unconstitutional.

Starting September 16, 2013, all legally married same-sex couples will be treated the same as heterosexual couples for federal tax purposes (including income, estate, and gift taxes), regardless of state of residence. In other words, if you are legally married as a gay couple, you can (and must) now file your taxes as “married filing jointly” or (the much less common) “married filing separately” status.

Furthermore, those who were legally married for the 2010-2012 tax years, will have an opportunity to amend the previously filed returns to potentially harvest refunds (tax advisers across the country must be rejoicing over the business this will generate).

There are a lot of implications for married same sex couples that come with this announcement, so I’ve done research to provide a Q&A resource for those folks who are impacted (and those who are simply curious).

So as Long as I was Married in a State that Recognizes Same Sex Marriage, I can File with Married Status?

Yes, you can now file your federal taxes as “married filing jointly” or “married filing separately” if you were married in a state that recognizes same sex marriages.

Which States Permit Legal Same Sex Marriages?

36 states plus the District of Columbia permit same-sex couples to marry – most of which just recently ruled jumping on board with this trend.

IRS same sex marriage tax status

This Wikipedia article has an updated map.

What if I have Moved to a State that Does not Permit Same Sex Marriages, Legally?

You can still file your federal income taxes under married status now. In general, if a state does not recognize or permit same sex marriages, you will probably still need to file your state tax return as an individual – but check with your state of residence for further information on how they react to this change.

What if I Have a Registered Domestic Partnership? Am I Impacted in Any Way?

No. Individuals of the same sex and opposite sex who are in registered domestic partnerships, civil unions or other similar formal relationships that are not marriages under state law are still not considered as married or spouses for federal tax purposes. For more information, check out the IRS FAQ on domestic partnerships.

When do Amended Returns Need to be Submitted by?

As mentioned, those in same sex marriages can amend previously submitted returns, if they choose. Taxpayers may file a claim for refund for three years from the date the return was filed or two years from the date the tax was paid, whichever is later. For more information, check out the IRS article on amended returns.

Am I Required to file Amended Tax Returns?

No, you are not required. Amended tax returns will be optional.

What are the Benefits of Filing as Married vs. Individual?

One of the biggest implications will be on health benefits for spouses. Previously, same-sex spouses had to pay for spousal benefits on an after-tax basis. Now, that benefit will be paid with pre-taxed dollars. This can be factored in to amended returns.

Legally married same sex couples are now exempted from the estate tax as well.

Are there Any Downsides to Filing Married vs. Individual?

Actually, yes. Due to the progressive nature of tax brackets and how they vary based on individual or married status (at most levels, married brackets are less than 2X the sum of individual brackets), many same sex couples will now pay a higher tax rate for combined income that pushes them to a higher tax bracket than if they were still filing as individuals.

Also, those filing as married must choose between either itemizing or taking the standard deduction (vs. the flexibility of filing individually). You cannot file separately with one couple filing itemized and the other taking the standard deduction.

Does this IRS Announcement Also Impact Social Security and Other Federal Agency Recognition of Same Sex Marriage?

Not directly, but each federal agency with implications is currently considering possible changes. As of this moment, Social Security still only recognizes couples living in states that allow same-sex marriages.

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