July 8, 2013

Edith Windsor, the plaintiff in this ground-breaking case, has recently shaken up the U.S. tax code by overturning the Defense of Marriage Act (DOMA).

State-recognized same-sex marriages are now legally recognized by the federal government with the Supreme Court of the United States’ June 26 ruling invalidating parts of the Defense of Marriage Act (DOMA). 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. Lawyers, certified public accountants (CPAs), other professionals and married same-sex couples should know what the changes in taxes and the Defense of Marriage Act mean for them.

Tax-Free Gifts For All

According to TIME, same-sex couples will be able to gift their significant other property tax-free. Before this ruling and according to federal tax law, same-sex couples were subject to taxes beyond the annual $14,000 exemption. For example, if a car, house, portfolio of stocks or any other property was valued at $50,000, the receiving party in the same sex relationship would have to pay taxes on $36,000 ($50,000 – $14,000 (gift exemption)). Now, this ruling states that in states that recognize same-sex marriages, a married same-sex couple can gift each other unlimited gifts tax-free on the federal level.

Beneficial Retirement Tax Benefits

Same-sex couples will now enjoy the same retirement tax-advantage benefits as opposite-sex couples. Before DOMA, only opposite-sex married couples with retirement investment vehicles including 401(k)s and Individual Retirement Accounts (IRAs) could defer disbursements until the age of 70 ½. If a partner of a same-sex couple passed away, the other partner was forced to take a distribution. If the deceased partner was younger than 70 ½, the surviving partner would incur early distribution penalties, in addition to the regular taxes. However, this ruling permits partners in legally recognized same-sex marriages to receive retirement assets without having to take a forced distribution.

Tax-Free Health Benefits

Partners of employees who received health benefits from their employer had to pay taxes on their individual health benefits. This ruling, however, should eliminate that tax obligation because spouses in opposite-sex couples, under federal law, are not taxed.

Married Filing Jointly

The Supreme Court’s decision may also help same-sex couples take more income home in the future and when amending and filing taxes. Individuals filing individually, with the new ruling, can save as much as $6,100 come tax time. Same-sex couples, according to the Internal Revenue Service, whose unions are legally recognized in 13 states, are also able to file jointly. This would permit a same-sex couple to save as much as $12,200 annually. It gives same-sex couples more than 1,000 federal benefits.

Social Security Changes

According to USA Today same-sex couples are now able to receive their partner’s Social Security benefits. With the new DOMA ruling, the surviving partner of a same-sex couple may be able to receive their deceased partner’s Social Security benefits. Prior to this, the surviving spouse of a same-sex couple was deprived of up to $28,968.

This ruling has given same-sex couples many, if not all of the same tax benefits that opposite-sex married couples have enjoyed for decades. Since everyone’s circumstances are different, it is best to speak with legal and financial advisers to determine what your circumstances entitle you to.