Last week the Internal Revenue Service (IRS) released information on what has been dubbed a “hugely important” questions for same sex couples. Essentially, the new rules mean that same sex couples who are legally married in one state will still be treated as married for tax purposes by the federal government, even if they move to a state which does not allow same sex couples to marry.
More Protection for Couples
While the U.S. Supreme Court’s landmark gay marriage decisions last summer were seen as a huge leap forward for equality, the decisions did not come close to permanently settling the matter. A majority of states still do not allow same sex couples to marry. This creates a complex patchwork of rules for taxes, inheritances, public benefits, and privileges. Same sex couples can be treated very differently simply by crossing a state line.
Obviously each state will treat couples differently based on state law. New York has marriage equality, and so same sex couples are treated the same as opposite sex couples here. But that still leaves open the question of treatment under federal law. What about couples who move out of New York? Do they lose all of their rights and privileges as a result?
The short answer: it depends. But, as a result of these new IRS rules, the couples will likely still be treated as married for federal tax purposes, even if they head to a non-marriage equality state. The U.S. Treasury Secretary explained that the IRS decision “assures legally married same-sex couples that they can move freely throughout the country knowing that their federal filing status will not change.”
The decision means that the IRS adopted a “celebration” approach to determining marriage status. In other words, whether or not a couple is married for federal purposes is if the initial celebration (creation) of the marriage occurred in a state that allows it. The marriage laws of the couple’s current residence does not decide the matter.
Most obviously, this will allows couples to file federal taxes jointly (though state taxes may need to be filed separately). On top of that, by treating same sex couples as married, the IRS decision will allow couples to claim additional exemptions attached to marriage, defer on IRA contributions, claim various tax credits available only for married couples, use the “portability” benefit for estate tax purposes, and more.
This is clearly good news for those hoping for fairness and uniformity for all legally married couples. If you have questions about how this may affect your estate planning or retirement, be sure to contact an attorney to learn more.