The Supreme Court today struck down the Defense of Marriage Act.
What does this mean for taxes?
It means couples in same-sex marriages no longer have to jump through the following hoops to meet their tax obligations:
- Prepare and file separate federal tax returns as two single people and applying tax law as it applies to single people.
- Prepare a “mock” federal return employing tax law as it applies to married people, to see what their tax situation would have looked like if the federal government had recognized their marriage.
- Use that “mock” return to prepare their state return as a married couple.
Instead, couples in same-sex marriages will do the following:
- Prepare their federal and state tax returns as a married couple, using married person tax law, same as any other married couple.
The ruling also means couples in same-sex marriages will no longer have “phantom income” to report when one spouse is on the other spouse’s employer-provided health insurance plan. And there will be no more gift tax conundrums on things like putting a spouse’s name on the title to a house.
Will all same-sex couples pay less in income taxes because of this ruling? NO, not necessarily. In my practice, 2/3 of my clients who are in same-sex marriages will actually PAY MORE in income taxes by filing as a married couple rather than as two single people.
But as I have said for years: you have to look beyond the bottom line on a 1040 on this issue and instead focus on the blatant discrimination that was marked by DOMA being in existence.
Couples who were married in years prior to 2013 can amend their tax returns for those prior years to claim refunds, if they would have benefited from filing as married in those years. Amending won’t be a requirement, though, so if a couple benefited from filing as two single people, they won’t be required to amend and pay additional taxes.
Stay tuned for more in the days to come as we sort through all the implications of this ruling.
Here are some other blogs to follow for more analysis: