Supreme Court Strikes down Key Parts of DOMA: How This Will Affect the Taxes of Same Sex Couples

In late June 2013, the U.S. Supreme Court issued a ruling that struck down several parts of the Defense of Marriage Act (signed into law in 1996) and paved the way for same-sex marriage to become the law of the land. To be clear, same-sex marriage is only the law in 12 states and the District of Columbia so far but precedents were set that may bring future cases to the court that would expand it to the entire country.

Under the current ruling, married same-sex couples in 12 states and D.C. can now realize the same tax benefits as other married couples. Here is a quick breakdown of how the tax code will affect married gay couples:

Tax Status Filing: Same-sex married couples, in states where it is legal, are now able to file taxes the same way other married couples do. There are three general categories of filing:

  • Married Filing Joint
  • Married Filing Separate
  • Surviving Spouse

Which filing status is most beneficial depends upon each individual circumstance. In cases where one spouse earns quite a bit more than the other, filing joint can save you money. In other cases, it may result in what has become known as the “marriage penalty.” Speak to a professional accountant to determine the best filing status for your situation.

Tax Credits: Same-sex couples are now eligible to claim tax credits ranging from the Child Tax Credit to the Lifetime Opportunity Credit to the Adoption Tax Credit. Any credit that is currently available to a married couple will now be available to same-sex married couples in the 12 states where it is legal.

Estate & Gift Taxes: Married couples have no limits on the transfer of property from one spouse to another and when one spouse dies, the other spouse is exempted from estate tax up to $5.25 million. Before the June DOMA ruling, same-sex couples were not entitled to this benefit; now they are.

Social Security: Social Security survivor benefits can now be received by same-sex surviving spouses without being subject to federal estate taxes (on amounts exceeding $5.25 million). This is the same benefit married couples now receive and at this point it is now available to same-sex couples in states where gay marriage is legal.

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