Home > Tax News & Info > What the DOMA ruling means for taxes

What the DOMA ruling means for taxes

On June 26, 2013, in a 5 to 4 decision, the Supreme Court ruled Section 3 of the Defense of Marriage Act to be unconstitutional.  Section 3 is the part of the Act that gives the Federal Government the right to tell the states what constitutes marriage, instead of leaving that to the states.  This ruling means that the Federal Government will now recognize marriages for same-sex couples in states that allow it.  States that do not recognize same-sex marriages will not be forced to do so, unless other laws are changed.

What does this have to do with taxes?

Federal Income Taxes

For states in which same-sex marriage is legal, such as Minnesota.  Same-sex married couples will now be required to file as Married Filing Jointly or Married Filing Separately.  This will expose these couples to both the bonuses and penalties of a married status. Many couples will find that this will mean a higher income tax bill as lower and higher (as opposed to middle) income couples can incur substantial marriage penalties, most often when they have similar incomes. However couples with very different incomes, will likely receive lower tax bills than they did when filing individually.

If you are in a state that recognizes civil unions or domestic partnerships, your filing status for Federal purposes will not change.

Estate Taxes

The case that prompted this ruling, U.S. vs. Windsor, was brought to the Supreme Court because the plaintiff was barred from claiming a marriage deduction on her same-sex partner's estate tax return.  An estate may claim an unlimited spousal exemption for inherited assets. Thus estates that go to spouses pay no tax, while all other heirs are subject to a 5.25 million dollar exemption.  This ruling will relieve same-sex spouses from this estate tax burden though only .2 percent of decedents leave estates big enough to owe tax.

Currently 13 states and D.C. allow same-sex marriages and include Calif., Conn., Del., Iowa, Maine, Md., Mass., MInn., NH, NY ,RI , VT & Wash.

This ruling is expected to pave the way for other changes in same-sex couples' ability to receive advantages of social security, pension, bankruptcy, and health related federal benefits extended to spouses.  The IRS and Federal agencies will be addressing the issues in the coming weeks.

Comments ( 0 )
  1. No comments yet.
Comments are currently closed.
Trackbacks & Pingbacks ( 0 )
  1. No trackbacks yet.
  2. Trackbacks are currently closed.