In August 2013, the IRS and U.S. Department of the Treasury ruled that same sex couples that had been legally married in a state that recognized their union would be considered married for federal tax filing purposes. Even if the state that the same sex couple resides in does not legally recognize their marriage the couple is still eligible to file their Federal taxes jointly as long as they were married in a state that legalized same sex marriage. The ruling represents a major victory for same sex couples who have been fighting to be recognized as married under Federal tax law guidelines. The ruling covers a broad scope of tax regulations including income, estate, gift, employee benefits, child tax credit, contributions to an IRA and more. It should be noted that although the ruling entitles same sex couples in the US to these tax benefits it does not apply to domestic partnerships, civil unions or other forms of non-marriage related relationships. Further information regarding the ruling can be found at the IRS website.
What does this Ruling Mean for Tax Season?
Given that the IRS now recognizes same sex marriage, it means that couples do not have to file their taxes independently. Instead, legally married same sex couples are now required to file their taxes as either a married couple filing jointly or married couple filing separately. In addition, same sex couples who have been married for at least three years are entitled to apply for an amended return from 2010, 2011 and 2012 that may result in additional refunds. Couples with children and/or dependents are now eligible for deductions and credits if they file are married and filing jointly. Examples of the deductions and credits that the same sex couple may be eligible for include an earned income tax credit, education benefits and dependency exemptions.
Does this Save Money?
In addition to being eligible for deductions and credits on a tax return, same sex couples may receive additional savings by filing jointly. Because tax rates are generally lower for individuals that are married and filing jointly, same sex couples may receive additional savings. However, this is dependent on the income levels and several other factors of the couple.
In addition to filing income tax returns jointly, same sex couples are now able to take advantage of an estate tax marital deduction. In short, if a person’s spouse passes then the surviving spouse can make an unlimited deduction from the estate of property from the deceased. Furthermore, same sex couples are now eligible to gift money up to 28,000 by taking advantage of the doubled annual gift tax exclusion granted to married couples.
What to do Next?
Given the complicated nature of taxes it is always best to consult with a professional for further advice. Many online resources are available including an IRS guide to frequently asked questions for same sex couples. Regardless, this is welcome news to same sex couples who have been fighting to receive the same benefits reserved for traditional marriages for the last few years.