5:48 am | Tuesday, July 30th, 2013
Same-sex couples all over the United States celebrated on June 26, 2013, after the US Supreme Court declared as unconstitutional part of the Defense of Marriage Act of 1996 (DOMA), that denied federal marital benefits to same-sex couples who are legally married under state law. One of the most obvious effects of the ruling is that same-sex couples can now report their income and file tax returns as married people.
The decision came from the U.S. v. Windsor, a case involving a same-sex couple living in New York. The female couple, Windsor and Spyer, was legally married in Canada and moved to New York, where the marriage is recognized as valid. When Spyer died, she left her entire estate to Windsor. The controversy arose when Windsor’s claim for federal estate tax exemption as a surviving spouse was denied by the IRS, which ruled that the exemption applies only to the traditional definition of marriage between a man and a woman under DOMA. This resulted in Windsor being compelled to pay more than $300,000 in estate taxes.
Windsor filed a lawsuit in federal court, seeking a refund of the estate taxes she paid. The case eventually reached the US Supreme Court, which held Section 3 of DOMA as unconstitutional under the equal protection clause of the Fifth Amendment of the US Constitution.
Although federal agencies, such as the Internal Revenue Service and US Citizenship and Immigration Services, have yet to come up with regulations implementing this ruling, tax and immigration practitioners agree that the decision will have monumental implications on important tax and immigration laws vis-à-vis same-sex couples.
Same-sex couples can now file their tax returns as married people. Filing tax return as “married” jointly with a spouse could result in higher deductions, which could mean lesser taxes to pay or higher refund to be received. Also, same-sex couples who could have filed their tax returns as married persons but did not for the past three years due to DOMA, may amend their returns to reflect their married status and claim for refund, if any.
Another benefit is the exemption from federal gift and estate taxes of a same-sex couple if property is to pass from spouse to another during their lifetime or upon the death of one of them. This is the exact situation in U.S. v. Windsor.
There are several other tax implications, but the most significant is the knowledge that same-sex couples are now to be treated as married couples. There is a caveat, however; federal tax benefits to same-sex couples as “married” apply only to same-sex marriages solemnized in states where same-sex marriage is legal.
For instance, if a same-sex couple got married in California (a state where same-sex is valid), said couple could file tax returns as “married” and enjoy the corresponding benefits of that status. But if the same couple moves to Texas (where same-sex is not recognized), the IRS will not accept the couple as “married” filers.
If you are unsure about the implications of this latest development in tax matters relative to same-sex marriage, contact a tax professional.
Edgardo M. Lopez is a California lawyer with over 25 years’ experience. His law firm specializes in tax matters dealing with the Internal Revenue Service (IRS) and civil litigation cases. Lopez is admitted to the State Bar of California, the United States Tax Court and a member of the American Society of Tax Problem Solvers. Like us on Facebook.com/TheTaxAttorney or e-mail: firstname.lastname@example.org – Toll free (855) 829 4771. Rated A+ by the Better Business Bureau.
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