same-sex marriage

5 Key Tax- and Financial-Planning Areas Affected by Same-Sex Marriage Ruling

Jul 1st 2015
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The US Supreme Court's ruling last week that same-sex marriage will be recognized in all 50 states will take awhile to settle into place – and it will broadly impact tax and financial planning for gay couples.

More than a dozen states are balking at recognizing the marriages based on religious objections, according to an article by The Hill.

In Texas, the attorney general told county clerks that they can refuse marriage licenses to same-sex couples, and Alabama Supreme Court Justice Roy Moore initially said a state court order could temporarily delay gay marriages, but he then retracted the comments, according to the report.

“The new frontier seems to be playing the First Amendment against the 14th Amendment,” says attorney Mark Luscombe, a CPA and principal federal tax analyst for Wolters Kluwer Tax & Accounting US.

SCOTUS justices relied on the 14th Amendment in granting same-sex marriage, but in the Hobby Lobby case, they ruled that companies could follow religious beliefs in what health coverage was available to their employees, he says.

In states like Texas, where county clerks can decide whether or not to issue marriage licenses to gay couples, “it's subject to a lot of questions,” Luscombe says. “If a county has a clerk unwilling to issue a license, that probably will fall. But you may have another case weighing the First Amendment against the 14th.”

More immediately, there's far more to consider. From the aspect of income and estate taxes, and overall financial planning, the ruling “warrants a reconsideration of all documents,” Luscombe says.

Here's a snapshot of five areas that will be affected.

1. Social Security. It's a biggie and the gate just opened on numerous benefits for same-sex couples. That includes spousal, survivor, and disability benefits, reports Bankrate.

2. Income taxes. Whether a couple is the same sex or opposite sex, marriage may put the spouses in a higher income tax bracket, especially if they are equal wage-earners, Luscombe says. If only one spouse is the wage-earner, marriage may bring a tax bonus.

Same-sex couples who benefited from filing as singles at the state level but filed jointly for federal taxes under IRS Rule 2013-17 no longer will get that perk, according to a tax brief issued by Wolters Kluwer.

IRS Rule 2013-17 states that the “state of celebration” would control for federal tax purposes, “even if the state in which they are domiciled does not recognize the validity of same-sex marriages.”

The IRS is expected to update the rule, Luscombe says. That's to remove the language referring to states that don't recognize same-sex marriage. So, at the federal tax level, technically nothing changes because the “state of celebration” controls.

3. Refiling returns. At the federal level, tax law will be affected by efforts to coordinate federal and state tax planning, and determining changes on previously filed federal forms. That includes changes in itemized deductions for paid state taxes and other considerations where amended state tax returns are filed for past tax years, according to the Wolters Kluwer tax brief.

At the state level, all taxing authorities will be required to recognize same-sex marriages for filings.

“Same-sex married couples within certain states who had to file as single individuals for state tax purposes now have a constitutional right to file amended returns as married at the state level,” the tax brief states. At issue is if the three-year limitations period for filing amended returns will apply. Another question is whether same-sex married couples must now retroactively file jointly or whether refiling will be made optional, either state-by-state or nationwide.

4. Estate taxes. Same-sex couples will benefit from the spousal benefit provisions in estate taxes, Luscombe says.

According to an article on, other estate-planning aspects to consider include:

  • Unlimited marital deductions for federal estate and gift taxes.
  • State employment benefits.
  • Switching from more expensive individual life insurance policies to “second to die” policies.
  • Converting separate property to community property.

5. Planning and compliance. It'll be easier for same-sex couples to coordinate their planning and compliance under tax laws – federal and state – when joint or married-filing-separately returns weren't allowed at the state level.

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