On the surface, the DOMA ruling in June seemed to have made the tax lives of couples in same-sex marriages a lot easier. And it did make taxes a lot easier for them — if they live in a state that recognizes their marriage.
But what if they live — or work — in a state that forbids same-gender marriage? Consider:
- A couple in a same-gender marriage lives in Iowa. They can file their federal and Iowa taxes as a married couple. But let’s say they change jobs and move to a state that doesn’t recognize their marriage. Are they still married for federal tax purposes? And how will they file their state return?
- Many of the same-gender marriage licenses issued in Iowa have been issued to people who don’t live in Iowa. For example, people from Missouri or Nebraska (or wherever) coming to Iowa, finding a courthouse, getting a marriage certificate and then going back to whatever state they came from. If that “state they came from” doesn’t recognize their marriage, are they married for federal tax purposes? And if they are considered married for federal tax purposes, how do they file their taxes in their home state if the state doesn’t recognize their marriage?
- People from Iowa who work in a non-recognition state. People in this situation can file their federal and Iowa taxes as married, but what about the non-resident return in the non-recognition state?
The IRS will need to provide guidance on federal taxes for couples who are in same-gender marriages but who live in states that don’t recognize the marriage.
Revenue Ruling 58-66
In 1958, the IRS issued Revenue Ruling 58-66, which addressed common law marriage. Some states recognize common law marriages, some states don’t. Here’s what this Revenue Ruling says regarding couples in common-law marriages who move to a state that doesn’t recognize their marriage (my emphasis added):
The marital status of individuals as determined under state law is recognized in the administration of the Federal income tax laws. Therefore, if applicable state law recognizes common-law marriages, the status of individuals living in such relationship that the state would treat them as husband and wife is, for Federal income tax purposes, that of husband and wife.
The foregoing position of the Internal Revenue Service with respect to a common-law marriage is equally applicable in the case of taxpayers who enter into a common-law marriage in a state which recognizes such relationship and who later move into a state in which a ceremony is required to initiate the marital relationship.
Note that I highlighted the phrase that includes the word “move.” Based on this Revenue Ruling, I would say a couple that lives in a recognition state and then moves to a non-recognition state should still be treated as married for federal tax purposes. (But we won’t know for sure til the IRS comes out with current guidance.)
But the word “move” is problematic for couples from non-recognition states who go to a recognition state to get a marriage license but who continue to live in the non-recognition state.
If they state in which they lived at the time the license was issued doesn’t recognize their marriage, then did a marriage exist for federal tax purposes? I don’t know. We need the IRS to tell us.
And what about the state tax treatment of a same-sex couple living in a non-recognition state? I’ll tackle that issue in my next post.