IRS: federal tax benefits for married same-sex couples in all U.S. states, territories

The Internal Revenue Service and the U.S. Treasury Department today (Aug. 29) issued a directive stating that same-sex couples, married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes.

The ruling – being described as landmark – applies regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriage or a jurisdiction that does not recognize same-sex marriage.

Prior to the ruling, married same-sex couples had to declare themselves “unmarried” to file their federal income tax returns. Furthermore, transfers of property, gifts and inheritances between same-sex spouses were taxed, unlike those between opposite-sex spouses.  Even health insurance benefits provided for a same-sex spouse were treated as taxable income, costing the average same-sex couple over $1,000 a year in additional taxes, according to the Human Rights Campaign, the nation’s largest LGBT civil rights group.

The Treasury Department’s ruling follows the historic decision on June 26 by the U.S. Supreme Court that a key provision in the 1996 Defense of Marriage Act was unconstitutional. That provision barred the federal government from recognizing same-sex marriage and required the government to deny married gay couples more than 1,300 rights and benefits.

“Today’s ruling provides certainty and clear, coherent tax filing guidance for all legally married same-sex couples nationwide. It provides access to benefits, responsibilities and protections under federal tax law that all Americans deserve,” said Treasury Secretary Jacob J. Lew. “This ruling also assures legally married same-sex couples that they can move freely throughout the country knowing that their federal filing status will not change.”

A statement from the department said that same-sex couples will be treated as married for all federal tax purposes, including income and gift and estate taxes. The ruling applies to all federal tax provisions where marriage is a factor, including filing status, claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA and claiming the earned income tax credit or child tax credit.

Any same-sex marriage legally entered into in one of the 50 states, the District of Columbia, a U.S. territory, or a foreign country will be covered by the ruling.

The ruling, the department said, does not apply to registered domestic partnerships, civil unions or similar formal relationships recognized under state law.

Some details from the IRS:

• Legally-married same-sex couples generally must file their 2013 federal income tax return using either the “married filing jointly” or “married filing separately” filing status.

• Individuals who were in same-sex marriages may, but are not required to, file original or amended returns choosing to be treated as married for federal tax purposes for one or more prior tax years still open under the statute of limitations.

• Generally, the statute of limitations for filing a refund claim is three years from the date the return was filed or two years from the date the tax was paid, whichever is later. As a result, refund claims can still be filed for tax years 2010, 2011 and 2012. Some taxpayers may have special circumstances that permit them to file refund claims for tax years 2009 and earlier.

• Employees who purchased same-sex spouse health insurance coverage from their employers on an after-tax basis may treat the amounts paid for that coverage as pre-tax and excludable from income.

The new rules from the department will become effective on Sept. 16.

“With today’s ruling, committed and loving gay and lesbian married couples will now be treated equally under our nation’s federal tax laws, regardless of what state they call home,” said HRC president Chad Griffin.  “These families finally have access to crucial tax benefits and protections previously denied to them under the discriminatory Defense of Marriage Act.”

“We urge all federal agencies to the greatest degree possible to join the Treasury Department and the IRS in recognizing the legal marriages of all same-sex couples,” continued Griffin.  “No family should have to worry about losing important federal rights and benefits, simply because they live in a state that doesn’t recognize them as equal under the law.”

Wisconsin Congressman Mark Pocan, D-Madison, responded to the news: “I applaud the Department of Treasury for siding with equality and treating all legally married couples in America the same. Loving same-sex couples should not be afraid they could lose their federal benefits or protections simply by moving to another state. Today’s decision continues our nation’s forceful progress toward recognizing the rights and responsibilities of all loving couples.”

Pocan is openly gay. He married husband Phil in Canada in 2006 and, based on today’s ruling, the couple should be eligible to receive all federal marriage-based tax benefits, including employee benefits, child tax credits, and gift and estate taxes.

In Illinois, where activists hope to see a marriage equality bill passed this fall, Bernard Cherkasov of Equality Illinois said, “Illinois couples should not be forced to go to another jurisdiction in order to marry and return home to enjoy the federal protections and benefits that are rightfully theirs.”

Referring to rulings from both the Treasury and the Health and Human Servicess Department, he added, “These rulings add more impetus to the fight for the freedom to marry, an argument we will carry to the Illinois House of Representatives.”