Tax Information Same-Sex Married Couples Need to Know

The Supreme Court has decided that the constitution gives same-sex couples the right to marry in all 50 states. If you are in a same-sex relationship, this change may have tax consequences for you now and in the future.

Before this ruling, some states already allowed same-sex marriage. Since 2013, the Internal Revenue Service enabled couples who were legally married in a state that recognized same-sex marriages to file joint federal tax returns and take advantage of other benefits for married couples.

If a same-sex couple, legally married in one state, moved to a state that did not allow same-sex marriage, such couples could still file federal returns jointly. However, they had to file state income tax returns as nonmarried taxpayers.

This meant preparing their income taxes twice – and possibly tracking taxable income, deductible expenses, and other tax items jointly for their federal return and separately for their two state returns.

Same-sex couples can now file joint federal and state income tax returns

For same-sex married couples, the confusion about filing a federal tax return one way and filing a state return another way is over. All married same-sex couples across the country are now legally recognized as married for federal and state income tax purposes.

Filing as a married couple has its advantages.

Many people pay less tax when they file a joint return than they would as two single taxpayers. This is usually true when one spouse earns more income than the other, or if one spouse doesn’t earn any income at all.

It can also be easier to file a joint return with someone with whom you pay bills. If you own a house, for example, you don’t have to decide who gets to deduct the mortgage interest. The same is true if you have dependents that you support together.

Filing as a married couple does not always save on taxes.

Some people find they pay more in total income tax as a married couple than they would have as two single taxpayers. This is a result of the way the income tax brackets and other tax provisions are structured.

In fact, married couples have long complained about this effect and called it the “marriage penalty.” You’re likely to pay more income tax as a married couple if you and your spouse make similar incomes.

If you are in a same-sex marriage, you must file as Married Filing Jointly or Married Filing Separately. You generally cannot choose one of the other filing statuses that may result in lower taxes.

If you choose to use the Married Filing Separately status, you do not qualify for certain tax breaks, such as the Earned Income Credit, child tax credit or education credits. If you and your spouse file separately and either of you are enrolled in a Marketplace health insurance plan, you cannot claim the Advanced Premium Tax Credit.

You also must itemize deductions if you are filing separately and your spouse itemizes deductions. One of you cannot take the standard deduction while the other claims itemized deductions.

As is the case for any married couple, you may be able to file as Head of Household if you file a separate return, your spouse did not live in your home during the last six months of the year, you paid more than half the cost of keeping up your home for the year, and your home was the main home of your dependent child (or a child that would have been your dependent, except that you released the exemption to the noncustodial parent).

Same-sex married couples can now make unlimited gifts and bequests to their spouse

Most gift-givers don’t need to worry about federal or state gift tax, regardless of the recipient. However, it was possible in the past for same-sex couples to owe state gift tax if they were especially generous to their partner, or if they gave him or her an interest in their home, for example.

Legalized same-sex marriage in all 50 states enables all married couples to give their spouse as much as they want while alive, without any worries about federal or state gift tax.

Leave property to your spouse without fear of estate tax.

Being able to bequeath unlimited amounts to your husband or wife is called a “spousal exclusion.” This benefit was already available at the federal level and in some states for same-sex married couples.

Now, it is available in every state.

According to state laws, same-sex married couples can now inherit each other’s property in the event of death, even without a will.

When a spouse dies, the other may qualify for special IRA provisions

When a spouse dies, leaving an Individual Retirement Account to the surviving spouse, the spousal rollover provision lets him or her delay taking distributions until age 70 1/2, if desired. The surviving spouse may also choose to stretch out tax deferred payments over his or her own lifetime.

Not only can that help stretch the payments out until the surviving spouse needs them, but spreading the payments out may result in lower taxes.