DOMA defined marriage as a union between a man and a woman. The case involved a same-sex couple who were married in Canada. One spouse died but the other spouse was not allowed to use the unlimited marital deduction resulting in $340,000 additional estate taxes [J.K. Lasser’s Monthly Tax Letter, August 2013]. The Act was declared unconstitutional by the United States Supreme Court [Windsor, No. 12-307, 6/26/13]. Under the Act, same-sex couples, who were married and resided in states sanctioning same-sex marriage, did not have the same rights under federal tax law as did different-sex married couples. That meant they were not allowed to file a joint income tax return or use the unlimited marital deduction for estate and gift taxes. This deduction enables the unused estate tax exemption of the first deceased spouse to be used by the surviving spouse. After the Supreme Court decision, same-sex married couples, residing in states that sanction gay marriage, will now be afforded the same rights as different-sex married couples for federal income, estate, and gift tax purposes [J.K. Lasser’s Monthly Tax Letter, August 2013]. Same-sex married couples must now file a joint return or separate returns. If they file a joint return, they may be subject to the “marriage penalty” if both spouses work and earn income over a certain threshold. If only one person in the couple works, they will have a reduction in their taxes. They can no longer file as single or head of household, but head of household and innocent spouse status may be applicable in the same circumstances as it is for different-sex married couples (see previous article on filing status by this author).
This decision is only applicable for federal tax law. State laws are not affected and each state must decide on the proper tax treatment for same-sex married couples residing in its state. At this date the IRS has not indicated if it will determine marriage based on the state in which the couple was married or the state in which the couple currently resides. Presently, only 13 states and the District of Columbia recognize same-sex marriages [J.K. Lasser’s Monthly Tax Letter, August 2013].
As a result of this decision, it may be helpful for same-sex married couples to file an amended federal income tax return using joint filing status and review their estate plans to take advantage of the unlimited marital deduction.
Dr. Goedde is a former college professor who taught income tax, auditing, personal finance, and financial accounting and has 25 years of experience preparing income tax returns and consulting. He published many accounting and tax articles in professional journals. He is presently retired and does tax return preparation and consulting. He also writes articles on various aspects of taxation. During tax season he works as a volunteer income tax return preparer for seniors and low income persons in the IRS’s VITA program.
1 comment on “Tax Implications Resulting From Demise Of The Defense Of Marriage Act (DOMA)”
JK Lasser is putting the cart in front of the horse a little bit. As of THIS MORNING the IRS still defines MFJ and MFS filing status for federal income tax purposes as a union between a man and a woman. The Obama Administration has asked the Justice Department to work with the IRS however there has been no reporting of progress from either governing entity and until there is I’m advising all taxpayers to wait for the IRS to change the definition of filing status for income tax purposes and ideally provide guidance on amending past returns. Acting prematurely has risks.
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