In June, 2013, in E.S. Windsor, the U.S. Supreme Court struck down Section 3 of the Defense of Marriage Act, which defined marriage for all federal purposes as the union between one man and one woman. Relying on the Supreme Court decision, on August 29 the IRS issued Revenue Ruling 2013-17 and announced that all legally married same-sex couples will be treated as married for all federal tax purposes.
This general rule applies to all legally married same-sex couples, even those who got married in a state that recognizes same-sex marriage and then moved to and currently reside in a state that does not recognize same-sex marriage. Note however, that the IRS’s ruling does not apply to unmarried same-sex couples who are in civil unions, or similar relationships.
The impact of Windsor and of the IRS Ruling is far reaching and will be unfolding over time, as more and more married same-sex couples will adjust their tax reporting and planning accordingly. Starting with the 2013 tax year (and 2012 returns filed on or after September 16, 2013), married same-sex couples can and must file their income tax returns as married individuals (filing jointly or separately). The IRS has also stated that married same-sex couples can amend previously filed returns to reflect their married status, provided that doing so is not otherwise time-barred.
In addition, married same-sex couples can now take advantage of the unlimited marital deduction for both gift and estate tax purposes. In other words, married same-sex spouses can now transfer wealth to their spouse, either by gift or at death, without using up any of their applicable exclusion amount, thereby minimizing their potential gift/estate tax exposure (note that this does not apply where the recipient-spouse is not a U.S. citizen).
Married same-sex couples interested in understanding how to take advantage of the newly available tax incentives or deciding whether to amend prior years’ returns should seek the assistance of a qualified attorney and/or tax professional. The attorneys at Paule, Camazine & Blumenthal, P.C. can help you both with filing taxes now as well as planning for the future.