These are some of the questions that remained after the landmark Supreme Court decision (US v. Windsor) in June that struck down the Defense of Marriage Act.
- What happens when couples marry in a state that recognizes same-sex marriage, but then move to a state that does not recognize it?
- Will same-sex marriages be considered valid for federal tax purposes retroactively?
- Will civil unions be treated as marriages for federal tax purposes?
Many questions were answered today in Revenue Ruling 2013-17. It states that “same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes” regardless of their current state of residence and regardless of what other state(s) they move to subsequent to that legal marriage. It isn’t just about filing status, although that appears to be the focus. There are over 200 code provisions having to do with “marriage” or “spouses” and now we can be sure those also apply to same-sex married couples. Gay married couples may apply for refunds unless they are barred by the statute of limitations. Civil unions will not be treated the same as marriages under the revenue ruling.
But just like marriage itself, it isn’t all rainbows and butterflies. Same-sex couples who are legally married must file jointly; they no longer have the option of filing as single people. They may, however, elect to file “married filing separately” as married couples have always had that option. Also, as was pointed out by some tax professionals, many same-sex married couples are going to find that there is no tax advantage at all when they file jointly. In fact, some couples with similar incomes will get hit with the “marriage penalty,” which is not an actual penalty, but is a common description of the situation in which their tax liability as a couple is much higher than it would be if they were single.