On June 26th, the United States Supreme Court found that Section 3 of the Defense of Marriage Act (DOMA) was wrong in failing to recognize state-authorized same sex marriages. As a result, all legally married gay and lesbian couples, residing in states that recognize their marriages, are considered married for purposes of all federal programs and tax laws. Thus, such couples are entitled to spousal social security benefits and significant estate tax savings. Furthermore, such couples must file their U.S. individual tax returns as “married” whether that be “married-filing jointly” or “married-filing separately”.
Edith Windsor won her case claiming a refund of $363,053, plus interest, for overpaid estate taxes paid on the estate of her late wife, Thea Spyer, who died in 2009, having been Windsor’s life partner for 44 years. The full impact of the decision on Federal tax filings is still not known. However, it is clear that all couples who have legally married in their state of residence will be treated the same as their heterosexual counterparts. This means that they will be able to file joint federal tax returns and can no longer file as Single.
What is still not decided is how couples married legally in a state that recognizes same-sex marriages1 will be treated if they reside in states that do NOT recognize same sex marriages. These matters must now be addressed by the IRS along with issues such as dealing with possible refund claims. Can same-sex couples amend past returns to get refunds? Must they amend past returns to pay additional tax if such tax is due? Also, what is the impact of states that have enacted same-sex relationship laws other than full marriage as six states currently provide?2
What is the impact on same-sex couples who have been divorced? Are alimony payments now income to the recipient spouse and a deduction to the paying spouse?
Although the gay and lesbian community is happy with the Windsor decision, some in their communities will be paying a higher income tax bill as a result of the "marriage penalty" inherent in the tax code. Affluent couples with approximately equal income are likely to pay higher income tax rates as married than they had as single.
As of July 22, 2013, the IRS Website (www.irs.gov) section for “Answers to Frequently Asked Questions for Same-Sex Couples” merely states:
“NOTE: The questions and answers below do not reflect the Supreme Court's June 26 decision relating to DOMA. We are reviewing the important June 26 Supreme Court decision on the Defense of Marriage Act. We will be working with the Department of Treasury and Department of Justice, and we will move swiftly to provide revised guidance in the near future.”
More to come on this issue, for sure.
E. Martin Davidoff, CPA, Esq. is the founder of the Dayton, New Jersey firm of E. Martin Davidoff & Associates, CPAs and has more than 30 years of experience practicing as a CPA and tax attorney. Davidoff is the founder of the IRS Tax Liaison Committee of the American Association of Attorney-CPAs and currently serves on the Executive Committee of the AAA-CPA. Mr. Davidoff may be reached at
1. As of July, 2013, eleven states (California, Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, New Hampshire, New York, Vermont and Washington), the District of Columbia, and five Native American tribes have legalized same-sex marriages. As of August 1, 2013, the states of Rhode Island and Minnesota will permit same-sex marriages. Prior to 2004, same-sex was not allowed in any U.S. jurisdiction.
2. New Jersey, Oregon, Nevada, Illinois, Hawaii, and Colorado.
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