Tax Implications of the Supreme Court's 2015 Same-Sex Marriage Ruling

Marriage equality has implications for state income taxes

WASHINGTON, DC - JUNE 26: Plaintiff Jim Obergefell holds a photo of his late husband John Arthur as he speaks to members of the media after the U.S. Supreme Court handed down a ruling regarding same-sex marriage June 26, 2015 outside the Supreme Court in Washington, DC. The high court ruled that same-sex couples have the right to marry in all 50 states. (Photo by Alex Wong/Getty Images)
Plaintiff Jim Obergefell holds a photo of his late husband John Arthur as he speaks to members of the media after the U.S. Supreme Court handed down a ruling regarding same-sex marriage June 26, 2015, outside the Supreme Court in Washington, DC. Photo:

Alex Wong / Getty Images

On June 26, 2015, the U.S. Supreme Court ruled in Obergefell v. Hodges that the 14th Amendment of the U.S. Constitution requires all states to license marriages between two people regardless of their genders. All states must recognize marriages lawfully performed in another state or country.

Jason Dinesen, an enrolled agent in Indianola, Iowa, says that tax filings will be easier due to this ruling because there's "no such thing as same-sex marriage anymore." Either people are married or they're not when it comes to taxes. The issue is black and white.

All married persons' tax returns are prepared and filed using one of the two married filing statuses for joint or separate returns. Same-sex married couples can collect Social Security benefits based on a spouse's earnings history in all 50 states. They can take leaves of absence from work to care for their spouses under the federal Family and Medical Leave Act. They can collect veterans' benefits as surviving spouses.

Key Takeaways

  • The IRS has recognized the validity of all marriages for federal tax purposes since 2013. But the 2015 Supreme Court ruling was more sweeping.
  • The Supreme Court ruled in Obergefell v. Hodges in 2015 that all states must license marriages regardless of spouses' genders.
  • The IRS also recognizes common-law marriages, where spouses haven't taken out a marriage license and have taken vows. But it doesn't recognize domestic partners as being married.
  • You may still have time in 2022 to go back and amend prior years' tax returns to take advantage of any married tax breaks you weren't able to claim the first time around.

The IRS Definition of 'Married'

The IRS has rules when it comes to who's married and who's not. You must have legally tied the knot. But what if you then separate?

You're still married, according to the IRS, as long as you don't have a final decree or judgment of divorce or a court-ordered decree of separate maintenance by the last day of the tax year: December 31. Temporary court orders issued during the divorce proceedings don't count, nor do separation agreements you might voluntarily enter into, even if they're filed with the court. You can have one or more of these and still be considered married.

Note

You're married for the entire tax year even if your spouse dies during the tax year.

You and your spouse do not have to reside together, and you might qualify for the advantageous head of household filing status if you don't and if you haven't done so during the last six months of the tax year. You would not have to file a married return in this case.

You don't have to be "legally" married in the 10 states and the District of Columbia where common-law marriages are recognized. In other words, you didn't take out a marriage license and stand before a justice of the peace or a clergy member. Alabama, Colorado, Iowa, Kansas, Montana, Oklahoma, Pennsylvania, Rhode Island, South Carolina, and Texas recognize common-law marriages.

The IRS says that common-law spouses are just as married for tax purposes as those who take out marriage licenses. But check local laws to make sure you really are common-law spouses. Certain rules apply. They can vary by state.

Registered domestic partners are not married by IRS standards, nor are civil union partners or those living in any other arrangement that's a marriage under their state's laws.

This Wasn't a Huge Federal Change

The IRS had announced in Revenue Ruling 2013-17 in 2013 that it would recognize the validity of all marriages for federal tax purposes. This was in response to another U.S. Supreme Court decision, United States v. Windsor.

Same-sex married couples have been required to file their federal 1040s as married persons since that time.

Note

Any tax issues after the 2015 court decision would be at the state level.

Amending Past Years' Returns

There shouldn't be any tax changes in states where same-sex marriages were already recognized prior to 2015. Couples in those states have always been able to file their federal and state returns as married persons. But you might still be able to amend filed state tax returns if you live in a state where same-sex marriage wasn't yet recognized at that time.

Note

Amending your return would allow you to change your filing status and recalculate your tax. This could potentially result in a refund.

Filing an amended return can be a good thing if you would receive a larger refund from the state due to your changed marital status. Check your state's statute of limitations to find out if you still qualify to file an amended return. Some states follow the federal rule. Others have their own rules.

The federal rule is that people have three years from the original return's filing date to file an amended return and still get a refund, or two years from the date they paid any tax associated with that return, whichever is later. You would have until April 15, 2022, if you filed your 2018 tax return on April 15, 2019.

Note

Your state might also have rules for same-sex couples who want to amend their returns, so check with a tax professional to make sure you know exactly where you stand.

Other Things To Watch Out For

There could be differences in a few other areas if you've been filing married federal returns but unmarried state returns. These include your basis in nondeductible IRAs, capital losses, basis in property transferred between spouses, or passive activity loss limitations.

Inheritance Tax Issues

Only two states that prohibited same-sex marriage have an inheritance tax: Kentucky and Nebraska. Tennessee used to have one, but it was repealed in 2016. You might want to review your estate plan. Make adjustments. Spouses are exempt from inheritance taxes in all states that impose them.

Review Your Withholding

Don't neglect to submit a revised W-4 to your employer to adjust your withholding allowances to married status. But Dinesen cautions that sometimes a taxpayer might need the higher withholding amount that comes from single withholding, so review your state-level withholding. Adjust it for your expected state tax liability.

Planning Ahead

The Obergefell case means that same-sex married couples have the same tax planning opportunities and pitfalls as other married couples. Signing a joint tax return comes with "joint and several liability." This means that each spouse is held responsible for any tax due, and they're liable for the accuracy of the return.

It would make sense to review all the tax benefits and drawbacks of getting married before you do so, if you haven't yet married. You can't take the adoption credit when you adopt your spouse's child, but you might qualify for it if you adopt the child before you get married. The bottom line: Plan accordingly.

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Sources
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  1. Cornell Law School Legal Information Institute. "Obergefell v. Hodges."

  2. IRS. "Publication 501, Dependents, Standard Deduction, and Filing Information," See "Marital Status."

  3. IRS. "Married Filing Jointly Filing Status."

  4. IRS. "Answers to Frequently Asked Questions for Registered Domestic Partners and Individuals in Civil Unions," See "Q1."

  5. IRS. "Internal Revenue Bulletin: 2013-38," See "Rev. Rul. 2013-17."

  6. IRS. "File Form 1040-X To Amend a Return."

  7. Tax Policy Center. "How Do State Estate and Inheritance Taxes Work?"

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