IRS Recognizes Same-Sex Marriages, Regardless of Where Couples Live

By :: August 30th, 2013

Just two weeks ago, I discussed potential tax issues a same-sex married couple could face if they live in a state that doesn’t recognize their marriage. Yesterday the IRS ruled that, for tax purposes, such couples are married regardless of where they live. That ruling answers the question of what filing status the couple must use but also complicates tax filing for same-sex couples that live in states that prohibit their marriages.

The IRS based its decision on a 1958 ruling that recognized common law marriages established in states that allowed them, even if a couple subsequently moved to a state that did not recognize such unions. Affected couples could continue to file federal tax returns as a married couple, even though their resident states considered them to be single. Notably, yesterday's ruling also said that the IRS will not consider registered domestic partnerships, civil unions, and other similar formal relationships to be marriages.

The ruling renders half of the table in my earlier post irrelevant (see new table) but leaves in place the table’s most complicated cells. A same-sex married couple that lives in a state that doesn’t recognize their marriage will have to file a married federal return and two individual state returns. In many states, the latter will require them to create two fictitious individual federal returns, because such returns are the basis for filing their state returns. Tax preparation software will surely handle the complication seamlessly but affected couples will still have to make decisions about which spouse claims their various deductions and non-wage income. And pity the couples that complete their tax returns the old fashioned way using pencil, paper, and a calculator.
Same-sex table w-X

The IRS ruling allows—but does not require—same-sex couples to amend tax returns filed over the past three years, refiling as married couples. Some couples should not refile: they could incur a dreaded marriage penalty, but they may have to fill out a new return to get the bad news. Going forward, they won’t have any choice—they will have to file married returns.

That decision is further complicated for couples in which one spouse has paid taxes on employer-paid health insurance premiums to cover the other spouse. Until now, those premiums counted as earnings and were subject to both income and payroll taxes. Premiums often totaled thousands of dollars each year and resulted in significantly bigger tax bills. The IRS now says that workers can amend tax returns to exclude that fringe benefit (and others) from taxable income. They can also recover any extra payroll taxes they incurred—as can their employers.

The IRS ruling means that, at least for tax purposes, the marital status of same-sex couples won’t change when they move across state lines. But that doesn’t mean that their lives will be any easier when April 15 rolls around.


  1. AMTbuff  ::  10:29 pm on August 30th, 2013:

    It’s hard to see how the IRS could have decided this any differently. Also, as a practical matter any other decision would have increased complexity and uncertainty.

  2. Michael Bindner  ::  2:11 am on August 31st, 2013:

    They can join the rest of us in dealing with the complexity of married returns. This ruling makes it slightly less likely that gay married couples in non-married states would go to court to fix this. Of course, they could still go to court and claim that their state should honor Article IV provisions that mandate that all states respect the actions of other states, which would essentially require that the state allow them to file jointly. Ohio has already done this due to a court order in favor of a gay couple who lived there who got married at Thurgood Marshall Airport in Baltimore. Eventually some action along these lines will lead to the repeal of Title II of DOMA – which was not addressed in the prior case because it was not at issue. Filing state taxes could very well make this an issue if a gay married couple files jointly and there return is rejected, leading to federal appeals to repeal Title II and full recognition in all states. Also, it won’t be long until enough states adopt Gay Marriage that the Supreme Court will feel comfortable taking a case making it a civil right. This is likely to happen sooner than we think.

  3. Leslie  ::  10:17 am on August 31st, 2013:

    I have to disagree with the concluding remark: “But that doesn’t mean that their lives will be any easier when April 15 rolls around.”

    The Windsor case eliminated a very large and unfair estate tax that unfairly targeted gay couples, widows and widowers.

    We live in the state of our marriage, California. But even a couple who move will see an easier time with federal taxes now and, in a very much shorter time, with their state taxes too.

    The IRS, the federal government, puts the onus back on states with discriminatory law, through the tax system. Numbers, dollars and cents, show very concretely the inequities of state marriage bans, and the inequalities of substituting civil unions and domestic partnerships which do not give couples any federal tax equity.

    I wonder if any state that bans same-sex marriage will be able to explain why a married gay couple might get federal subsidies for healthcare premiums in a state insurance exchange because the state says they file as singles, when a different-sex married couple is disqualified for the same subsidies because they must combine their incomes.

    Is there not a looming showdown between federal and state tax laws when a state tries to define marriage through tax law, and the federal government is trying to administer tax law equitably?

    No state I know can claim a valid “public policy” that aims to administer taxes unfairly. Whose marriage is “protected” when a spouse is forced to sell a home to pay estate taxes, or told to move, or die at the “right” time, in the “right” state?

    That’s not just uncivil. It’s criminal.

  4. Leslie  ::  10:40 am on August 31st, 2013:

    On the contrary, the IRS ruling makes it more likely gay couples: married, “civil unionized,” or “domestic partnerized” will litigate for inequities from state marriage bans, civil unions and domestic partnerships. Why three varieties with various, unequal rights?

    The Ohio couple who married in Maryland point out the atrocity of bans that tell people they have to move, live and die at the right place and the right time to have equal rights. What public policy was served? Let alone what “marriage was protected” by this inhumane law?

    Yes, the civil right will be recognized sooner than we are led to believe if we want to claim we are a civilized society.

  5. Leslie  ::  1:02 pm on September 1st, 2013:

    They could run Mitt Romney again, revised and updated:

    “Do you know 47% of the American people can’t vote now, and they pay taxes!”

    Nah! Limited appeal. Won’t enlarge his voter base.

  6. Victor Wooten  ::  2:52 pm on September 2nd, 2013:

    The mind is like the stomach. It is not how much you put into it that counts, but how much it digests.

  7. Donna Michaels  ::  2:55 am on September 4th, 2013:

    I really dont understand whats the fuzz about and why are they making a huge deal about this. Its too much politics!

  8. Tax Complications For Same-Sex Couples In Utah (And Elsewhere) | Make Money In  ::  4:21 pm on January 16th, 2014:

    […] The problem: While federal courts hash out the legality of Utah’s same-sex marriages, gay couples who married in Utah must file state income tax returns as individuals but federal returns as married. […]

  9. Settlement, Disappointment, and Equality  ::  2:01 am on April 6th, 2014:

    […] tax code, and now Medicare. The Obama Administration already allows married same-sex couples to file taxes together even if their state does not recognize their marriage. As of today, they can qualify for Medicare […]

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