IRS Extends Tax Benefits to Married Gay and Lesbian Couples

Tuesday, September 10, 2013

by Scott Greenberg

Recently, the Internal Revenue Service announced that legally married same-sex couples will be treated the same as heterosexual couples for federal tax purposes, regardless of where they currently reside.

The Treasury Department, following up on the Supreme Court’s ruling in June of 2013, which struck down a key section of the 1996 Defense of Marriage Act, announced that same-sex married couples can file joint federal tax returns.

One of the most significant decisions is that the government will allow gay and lesbian couples to file joint returns even if they have moved to states that do not permit same-sex marriage; however they may have to file their state tax returns as if they were not married, depending on state laws. Additionally, Social Security will only recognize couples living in states that allow same-sex marriages.

Thirteen states and the District of Columbia permit same-sex couples to marry, including California, Connecticut, Delaware, Iowa, Main, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont, and Washington.

The new rules, which take effect September 16, will provide “clear, coherent tax-filing guidance for all legally married same-sex couples nationwide.” Internal Revenue Service guidelines will apply to all federal taxes, including income, gift, and estate taxes. They affect personal and dependent exemptions and deductions, employee benefits, IRA contributions, and tax credits.

The biggest financial bonanza for wealthier couples will be the ability to take advantage of the unlimited marital deduction and higher exemption limits for estate tax purposes. A more common benefit will come in the form of the tax exclusion for employer-paid help insurance, which many same-sex spouses previously bought on an after-tax basis and will result in a typical tax savings of about $1,000 per year.

It is important to note that the new guidelines will not affect couples who are in civil unions or domestic partnerships rather than legal marriages.