Tax Implications of Supreme Court DOMA Case
"For one, same-sex couples can now file joint federal tax returns if the couple lives in a state that recognizes their marriage. It should be noted, however, that joint returns aren’t always beneficial. If both partners in a same-sex marriage have high taxable incomes, filing a joint return could result in more taxes being paid. For example, the modified adjusted gross income threshold amounts for calculating the net investment income tax, which applies for tax years after 2012, is $200,000 for taxpayers filing as single, $250,000 for couples filing joint returns, and $125,000 in the case of a married taxpayer filing a separate return.
Another result of the Supreme Court decision is that tax-free employer provided benefits to married same-sex partners that were previously includible in income under federal law are now excludible from income, so refunds can be claimed on this basis.
The DOMA ruling has also opened a Pandora’s box of tax questions which will be answered by future IRS guidance and court decisions:
(2) If an individual is married to a same-sex partner in a state like New York that recognizes such marriages, the fair market value of employee benefits received as a result of such marriage are excludible from the non-employee spouse’s income. But, it’s unclear what happens if the employee is transferred to a state that doesn’t recognize same-sex marriages. For example, could previously tax-free spousal benefits be converted to taxable non-spouse benefits?
(4) If one partner in a same-sex marriage amends his or her return from single to MFS (e.g. to reclaim imputed income from a spouse’s employment benefits), it’s unclear whether the other is also forced to amend his or her return.
(6) From an employer’s perspective, it’s uncertain how the Windsor decision will affect employment benefit plans for employers in different states. For example, will private companies need to consider providing spousal benefits to same-sex married employees regardless of which state the employee lives in?
While the full impact of the Supreme Court’s decision will not be known for a while, there are important and time-sensitive planning opportunities available now with respect to your taxes."
Clare L Garner Jr, CPA LLMT
NOTE: Compliments of Parker Tax Publishing http://www.parkertaxpublishing.com/
Clare L Garner Jr CPA LLMT | 07/10/2013