Just two months after the Defense of Marriage Act was struck down by the Supreme Court, the Treasury Department ruled same-sex couples who are legally married will be treated as married for federal income tax filing purposes.
There is a host of implications for the decision. Many same-sex married couples now live in states that don’t recognize same-sex marriage. This decision affects how those couples will be treated as far as federal income taxes are concerned, federal estate and gift taxes, and the tax breaks they receive for employer-sponsored health insurance and other employer-sponsored benefits.
This ruling is applicable to any same-sex couple that is legally married in any state, U.S. territory, District of Columbia or foreign country. This ruling does not, however, apply to any domestic partnership, civil union or formal relationships that may be recognized under state laws.
Same-sex marriage has been legalized in 13 states and the District of Columbia. It is also legal in 15 other countries.
In a statement, Treasury Secretary Jack Lew said, “Today’s ruling provides certainty and clear, coherent tax filing guidance for all legally married same-sex couples nationwide. It provides access to benefits, responsibilities and protections under federal tax law that all Americans deserve.”
As far as filing 2013 federal taxes, legally married same-sex couples must now file “married filing jointly” or “married filing separately.” They are also now eligible to file an amended return as a married couple and claim a refund when applicable for tax years 2010, 2011 and 2012.
As far as health insurance is concerned, until now money that was used to buy same-sex spousal insurance coverage in an employer based health plan was subjected to income tax. Now that money is treated as tax free as far as federal income taxes are concerned. The participating employee can now file a refund claim for the income taxes that were paid on those spousal insurance coverage premiums.
Favorable treatment will be offered with the federal estate tax. Same-sex surviving spouses will be entitled to inherit the estate of their deceased spouse tax-free. However, some legally married same-sex couples, just as their opposite-sex counterparts, will be subject to the marriage penalty, which refers to situations where a married couple gets a higher tax bill as a result of joint filing rather than when they file as single.