Updated Tax Rules for Married Same-Sex Couples
Following the Supreme Court decision striking down part of the Defense of Marriage Act, many same-sex partners were left in limbo regarding many areas, including IRS tax rules. On the 29th of August, the IRS took steps to clear up some of that confusion by allowing all legally married gay couples to file joint federal tax returns—even if they do not reside in a state which recognizes the legality of same-sex marriages. The latest IRS ruling allows same-sex couples the ability to move to and from any state they choose with the knowledge that their federal filing status will remain unchanged. Same-sex couples will now be afforded the same tax benefits as heterosexual married couples including estate tax exemptions, the standard marriage deduction, IRA contributions, earned income tax credits, dependent exemptions and the designation of the taxpayer’s filing status.
Benefits from Filing as Married?
Same-sex married couples will file either as “married filing jointly,” or “married filing separately,” just as heterosexual couples have always done. Since the statute of limitations for filing a refund claim is either three years from the date the return was filed or two years from the date taxes were paid, the government will also allow refund claims for same-sex married couples to be filed for the tax years 2010-2012. Those same-sex couples who believe their tax bill will automatically be lowered thanks to the new ruling could find themselves disappointed. All married couples run the risk of landing in a higher tax bracket, subsequently falling under recently increased taxes on taxpayers with higher incomes—particularly if both spouses are contributing substantial levels of income to the marriage.
As an example, a couple who makes $200,000 per year—with each partner contributing roughly the same amount of income—would pay a “marriage penalty of almost $900. On the flip side, if one spouse earned $180,000 of that $200,000 and the other spouse earned $20,000, filing jointly would save the couple over $8,800. For this reason, those couples who are considering amending their returns for the past three years—and expecting a windfall by doing so—might want to consult an experienced tax professional who can help determine whether it is beneficial to file amended returns or not.
The Time is Short to File 2012 Tax Returns
There is a very short window of opportunity following the new IRS ruling for same-sex couples who were legally married by last December 31st but who have not yet filed their 2012 tax return to file individually if they suspect they will be subject to marriage penalties.
Same-sex couples will also be eligible for estate and gift tax exemptions as well as combining IRAs and deducting taxes paid for employer health insurance.
There may remain complications for same-sex couples who live in any of the 37 states which have yet to recognize their marriage. These couples may be able to file their federal tax returns as married, but could still be required to file state returns as individuals even though most state income tax laws begin with federal taxable income. The IRS expects the new ruling to provide a small increase in federal revenues due to the likelihood of the marriage penalty coming into play for a significant number of same-sex couples.
When You Have IRS Questions, We Can Help
Taxes can be a complex subject, and those same-sex couples who will now be filing joint returns as a result of the recent IRS ruling may need tax guidance to ensure they make the best decisions. It remains to be seen whether states will fall into line with the federal ruling; if they do not, the tax complexities are bound to increase. Paul A. Grego is a highly experienced Louisiana tax attorney who has the knowledge and background necessary to ensure you get the best answers regarding IRS issues. Whether you are dealing with filing a federal return as a same-sex couple or have other tax issues, Paul A. Grego can help. Mr. Grego has helped thousands of clients with a variety of tax issues and wants to help you by offering a free consultation and answer any questions you may have. Call 504-302-4949 today to speak with an experienced Louisiana tax attorney.