On June 26, 2015, the U.S. Supreme Court ruled in Obergefell v. Hodges that the 14th Amendment of the U.S. Constitution requires all states to license marriages between two people regardless of their genders. All states must recognize marriages lawfully performed in another state or country.
Jason Dinesen, an enrolled agent in Indianola, Iowa, says that tax filings will be easier due to this ruling, because there's "no such thing as same-sex marriage anymore." From a tax perspective, people are married or they're not.
All married persons' tax returns are prepared and filed using one of the two married filing statuses. Same-sex married couples are eligible for Social Security benefits based on a spouse's earnings history in all 50 states. They're eligible to take leaves of absence from work under the federal Family and Medical Leave Act to care for their spouses, and they're eligible for veteran's benefits as surviving spouses.
The IRS Definition of "Married"
The IRS has some pretty specific rules when it comes to determining who's married and who's not. Obviously, you must have legally tied the knot. But what if you then separate?
You're still married, according to the IRS, as long as you don't have a final decree or judgment of divorce or a court-ordered decree of separate maintenance by the last day of the tax year. Temporary court orders issued during the divorce proceedings don't count, nor do separation agreements you might voluntarily enter into, even if they're filed with the court. You can have one or more of these and still be considered married.
You're still considered married for the entire tax year even if your spouse dies during the tax year.
You and your spouse do not have to reside together, but you might qualify for the advantageous head of household filing status if you don't and haven't done so during the last six months of the tax year. You would not have to file a married return in that case.
You don't actually have to be "legally" married in the 10 states and the District of Columbia where common law marriages are recognized. (In other words, you didn't take out a marriage license and stand before a justice of the peace or a clergy member.) Alabama, Colorado, Iowa, Kansas, Montana, Oklahoma, Pennsylvania, Rhode Island, South Carolina, and Texas recognize common law marriages.
The IRS says that common law spouses are just as married, for tax purposes, as those who do take out marriage licenses, but check local law to make sure you really are common law spouses. Certain rules apply, and they can vary by state.
Registered domestic partners are not considered married by the IRS, nor are civil union partners or those living in any other arrangement that's not considered a marriage under their state's laws.
This Wasn't a Huge Federal Change
The IRS had previously announced, back in Revenue Ruling 2013-17 in 2013, that it would recognize the validity of all marriages for federal tax purposes. This was in response to another U.S. Supreme Court decision, United States v. Windsor. Same-sex married couples have been required to file their federal 1040s as married persons since that time.
Any tax issues subsequent to the 2015 court decision would be at the state level.
Amending Previous Returns
There shouldn't be any tax changes in states where same-sex marriages were already legally recognized prior to 2015. Couples in those states have always been able to file their federal and state returns as married persons. But you might still have an opportunity to amend previously filed state tax returns if you live in a state where same-sex marriage wasn't yet recognized at that time.
Amending your return would allow you to change your filing status and recalculate your tax, which could potentially result in a refund.
Filing amended returns can be beneficial if taxpayers would receive additional refunds from the state due to their changed marital status. Check your state's statute of limitations to find out whether you still qualify to file an amended return. Some states follow the federal rule for amended returns, while others have their own rules.
The federal rule is that people have three years from the original filing deadline to file an amended return and still get a refund, or two years from the date they paid the tax associated with that return, whichever is later. For example, 2018 tax returns had an original filing deadline of April 15, 2019. The three-year rule thus gives taxpayers until April 15, 2022, to amend their return.
Your state might also have implemented special rules for same-sex couples who want to amend their returns, so check with a tax professional to make sure you know exactly where you stand.
Other Things to Watch Out For
There could be differences in a few other areas if you've been filing married federal returns but unmarried state returns. These include your basis in nondeductible IRAs, capital losses, basis in property transferred between spouses, or passive activity loss limitations.
Inheritance Tax Issues
Only two states that prohibited same-sex marriage have an inheritance tax—Kentucky and Nebraska. Tennessee previously had an inheritance tax, but it was repealed in 2016. You might want to review your estate plan and make any necessary adjustments, because as of 2020, spouses are exempt from inheritance taxes in all states that impose them.
Review Your Withholding
Don't neglect to submit a revised W-4 to your employer to adjust your withholding allowances to married status. But Dinesen cautions that sometimes a taxpayer might need the higher withholding amount that comes from the single withholding calculations, so review your state-level withholding and adjust it accordingly for your expected state tax liability.
The Obergefell case means that same-sex married couples have the same tax planning opportunities and pitfalls as heterosexual married couples. Signing a joint tax return comes with "joint and several liabilities." This means that each spouse can be held individually responsible for any tax due, and individually liable for the accuracy of the return.
It would make sense to review all the tax benefits and drawbacks of getting married before you do so, if you haven't yet married. For example, you can't take the adoption credit when you adopt your spouse's child, but you might qualify for it if you adopt the child before you get married. The bottom line: Plan accordingly.