How the Supreme Court Repeal of DOMA Will Affect Same-Sex Couples
On June 26, 2013, the Supreme Court ruled a portion of the Defense of Marriage Act (DOMA) unconstitutional. That section of DOMA defined marriage as a union between one man and one woman, meaning the Federal government did not recognize same-sex marriages.
After the repeal, same-sex marriages that are legally recognized by their individual states will now be recognized at the Federal level as well. These couples will now be eligible to receive numerous federal protections that are offered to spouses in opposite-sex marriages, such as Social Security and pension benefits for spouses, family health insurance coverage, hospital visitation rights, and tax-free inheritance.
What does this mean for taxes?
For one, inheritance will be covered under the same Federal tax exemptions they are for same-sex married couples, whereas prior to the repeal, inheritance between same-sex married couples was fully taxable by the Federal government.
It also means they will file a joint Federal tax return. Prior to this repeal, couples who were legally married in their states were able to file join returns in their state, but were required to file separate returns for Federal purposes. Filing a joint return could cost some taxpayers more in overall taxes, but will likely save them money in tax preparation fees as filing returns for same-sex couples is complex and labor intensive.
What about Registered Domestic Partners (RDPs)?
In states where same-sex marriage is not legally recognized, many couples have chosen Registered Domestic Partnership as an alternative. For income tax purposes, these couples were treated as married for the filing of their state income taxes in California, but were still unable to file joint Federal returns. It is currently unclear whether those unions will be viewed as the equivalent of marriage by the Federal Government for purposes of the benefits discussed above.
For tax purposes, the IRS will need to determine how the repeal of DOMA will affect the way Registered Domestic Partners are treated. There are indications, based on previous literature from the IRS Office of Chief Counsel, that RDPs could be considered married for income tax purposes, but the IRS has yet to specifically address the issue.
For more information or questions, please contact Logan Castle at Aiello, Goodrich & Teuscher at (530) 926-3881.
Logan Castle, CPA
Logan Castle, CPA
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