Ruling clarifies federal tax provisions for same-sex couples
A recent ruling clarified some murkiness associated with tax standards for married same-sex couples who relocate across state borders. This year on August 29, the US Treasury Department and the Internal Revenue Service clarified that same-sex couples who are legally married in a state or country that recognizes their marriage will be treated as married for federal tax purposes, regardless of whether couples live in a state that recognizes same-sex marriage or a state that does not, such as Missouri.
The ruling implements the federal tax aspects of the Supreme Court’s June 26 decision in United States v. Windsor, which invalidated a key provision of the 1996 Defense of Marriage Act (DOMA). Under the recent
ruling, which went in effect September 16, same-sex couples are treated as married for all federal tax purposes, including income, gift, and estate taxes.
The ruling applies to all federal tax provisions where marriage is a factor, including filing status, deductions taken, employee benefits, IRA contributions, and claims for certain tax credits and personal and dependent exemptions.
Prior to the ruling, it was unclear if same-sex couples who legally marry in a state that allows same-sex marriage but then move to a state that does not would be considered married for federal tax purposes. Under the ruling, any same-sex marriage legally entered into in one of the 50 states, the District of Columbia, a US territory, or a foreign country will be recognized for federal tax purposes, regardless of where the couple currently resides. However, the ruling does not apply to registered domestic partnerships, civil unions, or similar formal relationships recognized under state law.
The Treasury Department and the IRS also issued two separate sets of frequently asked questions, one for married same sex couples under state law and one for registered domestic partners and individuals in civil unions.
According to the first set of answers, legally married same-sex couples generally must file their 2013 federal income tax return using either the “married filing jointly” or the “married filing separately” filing status. Those who were in same-sex marriages during previous years may (but are not required to) file amended returns as married taxpayers for one or more prior tax years if those years are still open tax years under the applicable statute of limitations; that time span is generally three years for federal income tax purposes.
In addition, employees who purchased health insurance coverage for their same-sex spouse through their employer on an after-tax basis may treat the amounts paid for that coverage as pre-tax and thus excludable from income.
Since the ruling was released, the IRS has issued separate guidance for employers who wish to file refund claims for payroll taxes paid on previously taxed health insurance and fringe benefits that were provided to legally married same-sex spouses. The IRS has also promised additional guidance on how qualified retirement plans, cafeteria plans, and other taxfavored arrangements should treat same-sex couples for periods before September 16, the effective date of the ruling.