IRS Recognizes Same-Sex Marriage for Federal Tax Purposes

By Nancy C. Pohl & Michael J. Payne



Nancy C. Pohl

In Revenue Ruling 2013-17, the IRS provided the much anticipated guidance it had promised in the wake of the Supreme Court’s ruling in Windsor v. U.S. , 133 S.Ct 2675 (2013), which invalidated key provisions of the 1996 Defense of Marriage Act.  Several key issues were left unanswered by Windsor, including the paramount issue of what definition of marriage was to be used – the state where the marriage took place, or the state of residence.
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

For federal income tax purposes, the Ruling states that legally married same-sex couples generally must file their 2013 federal income tax returns using either the "married filing jointly" or "married filing separately" filing status.  Individuals who were in same-sex marriages during the unexpired statute of limitations period (generally the 2010, 2011, and 2012 tax years) may file amended returns to claim refunds for overpayment of tax, if less tax would be due under a married filing status.  Additionally, employees who purchased same-sex spouse health insurance coverage from their employers on an after-tax basis may treat the amounts as pre-tax and excludable from income.

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.