IRS Makes a Decision on Same-Sex Marriage Filings

September 5, 2013 | By: TaxCure Staff

gay marriage and taxesEarlier this year, the Supreme Court made it clear that the Federal Government must acknowledge same-sex marriages by striking down portions of the Defense of Marriage Act (DOMA).

The move resulted in some questions about how taxes should be filed since not all states recognize same-sex marriage. Recently, the IRS answered at least one of the questions associated with the end of DOMA: Who is recognized as “married.”

Filing Taxes as a Same-Sex Couple

The IRS has decided that same-sex couples officially married in any state can file jointly. If you were legally married in a state that recognizes same-sex marriage, you can file your taxes jointly, even if you reside in a state that doesn’t recognize your marriage. (You will still have to observe state tax law when filing, however, so you might not be able to file jointly in your state of residence, even if you can file jointly on the federal level.)

The IRS has made it clear that “marriage” has to be involved. Civil unions and other similar partnerships are not to be recognized as the same thing as marriage, and so those with these types of partnerships will still not be able to file jointly.

The IRS ruling raises new questions about legal partnerships as a result. In states where same-sex arrangements aren’t called marriage, couples might get the same tax treatment as their “married” heterosexual counterparts, but the federal government – at least as it relates to taxes – doesn’t offer anything different.

Just Because You Can File Jointly, Should You?

Even if you can file your federal taxes jointly now, it doesn’t mean that you should. Same-sex married couples now face the same question that many married heterosexual couples face: The so-called “marriage penalty.”

When you begin making a certain amount of money, it isn’t to your advantage to file jointly. For example, if you and your spouse both make close to the same amount of money and you both have reasonably high incomes, you could lose out. Some of the tax advantages that begin to phase out or disappear at $250,000 for married couples are still in existence for singles that make $200,000. If you each make $150,000, it might be in your best interest to file single and divide up the tax deductions and/or credits equally, rather than combine your incomes and lose out on some of the benefits.

Filing jointly works best for married couples that experience a wide income disparity. That way, the lower income of one spouse can be averaged with the higher income of the other in a way that brings down the tax bracket to something lower. It’s about lowering the overall marginal tax rate for the household. Members of same-sex couplings in situations where they make similar amounts of money may not benefit from the IRS ruling either.

Same-sex married couples should take the time to run the numbers and determine whether or not it really does make sense to file jointly. And, if you should have been filing jointly at some point in the last three years (2010, 2011, and 2012), it’s possible to amend your tax return so that you receive the refund you deserve.