Defense of Marriage Act rulings tax consequenses

State-recognized same-sex marriages are now legally recognized by the federal government with the Supreme Court of the United States’ June 26, 2013 ruling invalidating parts of the Defense of Marriage Act (DOMA). Married same-sex couples may not understand what the changes in taxes due to the Defense of Marriage Act rulings mean for them. For everything from Social Security benefits to retirement plan beneficiaries to the taxation of an inheritance, marital status often establishes rights at both the federal and state levels.

The decision clears the way for same-sex spouses to be treated equally compared to opposite-sex spouses for federal law purposes. It does nothing to establish uniformity at the state level—the states remain free to define marriage as they see fit, including not recognizing same-sex marriages legally performed in other states.

Same sex couples that marry in states that recognize same-sex marriages will be able to take advantage of the same tax benefits available to opposite-sex married couples. Those residing in states which do not recognize same-sex marriages will still have to file their state return as single or head of household. Impacting employers is the taxation of health benefits, under which DOMA often required employees to pay for their same-sex spouses’ benefits on a post-tax basis.

The Windsor decision will change this tax status for many, but the process of determining precisely who qualifies for pre-tax treatment may be complicated.

Some areas impacted:

  • Filing status, Fed vs. State
  • Estate tax
  • IRA
  • Itemized deductions
  • Community property issues
  • Retirement and taxable social security issues
  • Military issues, including retirement, disability and death benefits
  • Health benefits