Same-Sex Marriages and Taxes
Unless you’ve been living under a rock, you’ve probably heard about the U.S. Supreme Court striking down section 3 of the federal Defense of Marriage Act (“DOMA”) which occurred in June of this year.
The IRS and the Treasury Department issued a ruling (Revenue Ruling 2013-17) on August 29, 2013, which states that same-sex couples who are legally married in any jurisdiction that recognizes marriage will be treated as legally married for all federal tax purposes. Even if the couple reside in a state (such as Florida) that does not recognize the marriage, the same-sex [pullquote_right] Same-sex couples who are legally married in any jurisdiction that recognizes marriage will be treated as legally married for all federal tax purposes. [/pullquote_right]couples will still have the same federal rights as any other married couple.
What does this affect?
Any federal tax provisions involving marital status such as claiming personal exemptions, taking standard deductions, filing status, employee benefits, contributing to IRA’s and claiming the earned income tax credit or child tax credit.
This also affects estate and gift taxes which means that same-sex couples can take advantage of the marital deduction, portability and gift-splitting. Marital deduction allows spouses to transfer as much of their assets to each other, during their life or at death, without having to pay any federal estate or gift taxes, and as long as the spouse is a U.S. citizen. With portability, a spouse can use the unused estate tax exclusion of the deceased spouse, and add it to their own, to transfer up to $10.5 (in 2013) million to heirs without having to pay estate tax. Gift-splitting allows spouses to combine their annual exclusion amount (in 2013, an individual can transfer up to $14,000/year to as many people as he/she wants without having to file a gift tax return) so that they can transfer up to $28,000/year to as many people as they want.
This also means that same-sex couples could be eligible for refunds for as far back as three years worth of tax returns. Thus, same-sex couples may want to look into whether they should amend their tax returns.
This is good news for same-sex couples, but they should consult with their tax and estate planning advisors to determine how the new rules may affect them. Contact Estate Planning attorney, Laurie Ohall, today.