IRS Clarifies Tax Treatment of Same-Sex Marriages

The U.S. tax code is an ever-evolving thing. Recently, it evolved in not only how the code affects taxpayers, but in how those taxpayers are configured. Namely, the U.S. Supreme Court’s historic decision in United States v. Windsor coupled with the release of IRSRevenue Ruling 2013-17 has clarified the federal tax treatment of same-sex marriages.

DOMA struck down

In Windsor, the Court struck down Section 3 of the Defense of Marriage Act (DOMA). Therefore, under federal law, the definition of “marriage” was no longer a legal union only between a man and woman as husband and wife, with “spouse” being defined as a husband or wife of the opposite sex.

Following Windsor, same-sex married couples became subject to the same federal tax rules, benefits and risks to which opposite-sex marriages had been subject for decades. Problem was, the language of federal tax regulations was directed solely toward opposite-sex couples. So implementing the Supreme Court’s DOMA mandate posed a challenge to the IRS.

State of celebration

In response, the agency issued Revenue Ruling 2013-17 this past August. The ruling states that, going forward, any references to “husband and wife” or either word used alone will include same-sex spouses who have been lawfully married under state law.

Revenue Ruling 2013-17 also laid to rest a major question mark left standing by the Supreme Court. Many observers wondered how a same-sex couple would be treated for tax purposes if they were married in a state that recognized such marriages but moved to one that doesn’t. The ruling set forth a state-of-celebration approach, whereby same-sex couples who marry in a state (or foreign country) that legally authorizes such marriages would be treated as married for federal tax purposes no matter where they moved.

The ruling also established an important date: Sept. 16, 2013. Beginning on this date, all original tax returns filed by same-sex married couples must reflect their marital status. (This rule doesn’t apply to amended returns.) Although there’s a limited exception permitting a married person to file as head of household in some circumstances, same-sex couples must generally choose between filing jointly or married filing separately.

Various outcomes

For same-sex married couples, the rule changes could mean tax advantages involving health care benefits and for couples with one wage-earner or with vastly different incomes. But there could be disadvantages for couples with similar incomes in the form of the infamous “marriage penalty.” Whether the changes pertain to you, a family member or friend, it’s advisable to contact a tax professional for advice in adjusting to them.