Tax Implications of Same-Sex Marriages

The Supreme Court struck down Section 3 of the Defense of Marriage Act (DOMA) in the case of U.S. v. Windsor.  The decision has broad tax implications for same-sex couples.

Joint federal income tax returns.  Same-sex couples may now file joint federal income tax returns. It should be noted, however, that joint returns aren't always beneficial.  If both partners in a same-sex marriage have high taxable incomes, filing a joint return could result in more taxes being paid.  

Exclusion of benefits from income. Another result of the Supreme Court decision is that tax-free employer provided benefits to married same-sex partners that were previously included in income under federal law are now excluded from income, so refunds can be claimed on this basis as well. 

Estate tax marital deduction.  The estate of a partner in a same-sex marriage is entitled to the marital deduction, which means the partner's estate passes tax-free to his or her spouse. 

Federal benefits.  The Court's decision also means that partners of federal employees are eligible to receive federal benefits, as well as social security survivor benefits upon the death of a partner.

The IRS has clarified that, for federal tax purposes, if a same-sex couple is married in a state where it is legal to perform same-sex marriages, the marriage is recognized for federal tax purposes regardless of where the married couple lives (i.e., whether or not they live in a state that recognizes same-sex marriages). However, individuals (whether of the opposite sex or the same sex) who have entered into a registered domestic partnership, civil union, or other similar formal relationship recognized under state law, but not denominated as a marriage under the laws of that state, are not treated as being married for federal tax purposes.