IRS Adjusts Filing Rules for Same-Sex Marriages
Starting with next year's returns, couples can file jointly even if living in a state that doesn't permit gay marriage.
September 8, 2013 - 1:11 pm
WASHINGTON – The Internal Revenue Service has announced it will allow married gay couples to file joint federal income tax returns for 2013 even if they reside in states that don’t recognize same-sex marriage.
The decision comes in response to a U.S. Supreme Court decision issued on June 26 that overturned a key provision in the 1996 Defense of Marriage Act. Under that law, the federal government was not required to recognize same-sex marriages. The high court ruled that provision unconstitutional after the Obama administration refused to defend it. The ruling forced the IRS and other agencies to develop compliance plans.
Currently 13 states – California, Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont and Washington — have legalized the issuance of marriage licenses to gay couples. The District of Columbia, several counties in New Mexico and a number of Native American tribes also have OK’d the practice.
Treasury Secretary Jacob Lew, whose agency oversees the IRS, said the decision “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,” Lew said. “This ruling also assures legally married same-sex couples that they can move freely throughout the country knowing that their federal filing status will not change.”
Under the IRS ruling, same sex couples will be treated as married for all federal tax purposes, including income and gift and estate taxes. The decision applies to all federal tax provisions where marriage is a factor, including filing status, claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA and claiming the earned income tax credit or child tax credit.
The new rules are scheduled to take effect on Sept. 16.
Six states prohibit same-sex marriage under state law. Another 29 prohibit it under their state constitution. The ruling recognizes for federal tax purposes the marriages of gay couples residing in those prohibition states if they legally wedded in states where the law permits it. The IRS ruling does not apply to registered domestic partnerships, civil unions or similar formal relationships.
Furthermore, complicating the matter, married gay couples may be required to file separate state tax returns as if they live in a state that doesn’t recognize same-sex nuptials. Social Security, meanwhile, will only recognize married couples living in states that allow same-sex marriages.
Prior to the IRS decision, lawfully married same-sex couples were required to declare themselves “unmarried” to file their federal income tax returns. Transfers of property, gifts and inheritances between same-sex spouses were taxed unlike those transactions between opposite-sex spouses. Health insurance benefits provided for a same-sex spouse were treated as taxable income, costing the average same-sex couple over $1,000 a year in additional taxes.
The IRS isn’t the only agency adapting its policies to comply with the June 26 ruling. The Department of Health and Human Services issued a memo last week making it clear that beneficiaries in private Medicare plans have access to equal coverage when it comes to care in a nursing home where their spouse lives regardless of sexual orientation.
“HHS is working swiftly to implement the Supreme Court’s decision and maximize federal recognition of same-sex spouses in HHS programs,” said HHS Secretary Kathleen Sebelius. “Today’s announcement is the first of many steps that we will be taking over the coming months to clarify the effects of the Supreme Court’s decision and to ensure that gay and lesbian married couples are treated equally under the law.”
Prior to the HHS declaration, seniors with Medicare Advantage faced the possibility of either receiving coverage in a nursing home away from their same-sex spouse or dis-enrolling from the Medicare Advantage plan, resulting in increased out-of-pocket expenses in order to receive care in the same nursing home as their same-sex spouse.
Other federal agencies have issued similar declarations to correspond with the high court decision, including the Office of Personnel Management, the Department of Defense and the Department of Homeland Security. Others are expected to follow suit.