IRS Announcement: Same-Sex Couples Recognized as Married for Federal Tax Purposes

Tax News

As a result of the recent U.S. Supreme Court decision to strike down part of the Defense of Marriage Act (DOMA) on June 26, the U.S. Treasury Department and the IRS announced today that same-sex couples legally married in states that recognize same sex marriage, will be treated as married for federal tax purposes.

This decision gives people in same-sex marriages the same federal tax benefits previously only available to heterosexual marriages, potentially saving them time and money when it’s time to file their taxes and could mean a reduction in their tax liability.

As always, we are here to break down what this IRS announcement means to you:

Who does this impact?

  • Whether you live in a state that recognizes same-sex marriage or not, as long as you were legally married in a state that recognizes same-sex marriages this applies to you.
  • This ruling does not apply to individuals in Registered Domestic Partnerships or Civil Unions.

What does this mean for your taxes?

  • Legally married same sex couples must now file their 2013 taxes as married filing jointly or married filing separately.
  • You also have the choice to file an amended return as a married couple for the past three years, tax years 2010, 2011, and 2012.  The IRS may also allow you to file a refund claim for tax years 2009 and earlier if you already signed an agreement with the IRS due to special circumstances.  Whether you choose to amend should be dependent on your tax situation.  Tax Caster 2012 is a great free way, to understand how this will impact your 2012 tax return.

Deductions and Credits for Dependents – If you file married filing jointly, you will be able to take tax deductions and credits for your children and other dependents.

  • Dependency Exemption –  The dependency deduction may mean an additional tax deduction of $3,900 per dependent and an additional $3,900 exemption for your spouse.
  • Earned Income Tax Credit – When you file as a married couple you may be eligible for an Earned Income Tax Credit worth up to $6,044 for 2013.
  • Education Credits and Deductions – Education is expensive, you may be able to claim a tax deduction on your taxes of up to $4,000 for your dependent or spouse’s education.

Tax Rates When Filing as a Married Couple

  • There may be a possible reduction in your tax liability since tax rates are typically lower for couples filing married filing jointly.  A married same-sex couple who earns $80,000 per year may see savings of at least $500 when filing jointly without considering additional deductions they will be entitled to.

Savings on Tax Prep

  • You will potentially be able to save time and money on your tax preparation costs.  People who previously had to pay high fees to have someone prepare their taxes due to the complexity of filing multiple federal and state returns, can easily and accurately prepare their taxes together with TurboTax at a significantly lower cost.

Tax Savings on Inherited Property and Gifts

  • A surviving spouse in a same-sex marriage can now take advantage of the estate tax marital deduction, which allows an unlimited deduction from the gross estate of property passing to the surviving spouse.
  • Legally recognized same-sex couples can now gift money and take advantage of a doubled annual gift tax exclusion of $28,000).

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

What Should I Do Now?

  • TurboTax has you covered.  As with all tax laws TurboTax will be up to date with the latest tax law changes.   Whether you want to amend your prior years tax return or have a question we are here for you.
  • You can check and see if these changes to the tax law will affect your tax year 2012 return with TaxCaster, a free online calculator.
  • If you didn’t file your 2012 tax return yet, you have the option to chose to file as married or single prior to 9/16.  If you will not benefit by filing married filing jointly or married filing separately you can complete your tax return with TurboTax before that date.  After 9/16 you must file as married.
  • Check back with the blog for more updates and tax benefits for same-sex marriages.