By Nancy C. Pohl & Michael J. Payne
|Nancy C. Pohl|
The Ruling definitively establishes that the validity of a same-sex marriage for federal tax purposes depends on the state where the marriage took place, and not the married couple’s place of domicile. Thus, a same sex couple who are Arizona residents and get married in another state that recognizes same sex marriage would be considered married for federal tax purposes.
The Ruling also concludes that domestic partnerships, civil unions, or other similar formal relationships recognized by some states will not be recognized as marriage relationships under federal tax law.
|Michael J. Payne|
The Ruling also has significant gift and estate tax impacts. Same-sex married couples now can utilize the marital deduction for federal estate and gift taxes, generally allowing them to transfer as much as they want to each other without having to pay any federal estate or gift tax. Additionally, the Ruling allows the widow or widower in a same-sex married couple to utilize the deceased spouse’s unused estate tax exclusion (currently $5.25 million if no portion has been utilized) against the widow or widower’s estate at his or her death. The use of the deceased spouse’s unused estate tax exclusion is commonly referred to as "portability". Moreover, these couples can also take advantage of gift-splitting, which allows spouses to combine the annual gift tax exclusion. In 2013, gift splitting would allow a married couple to jointly give $28,000 to any person without incurring gift tax.