A new ruling has declared tax breaks for same sex marriages since they will now receive equality across the entire nation.The Defense of Marriage Act (DOMA), enacted by Bill Clinton in 1996, was terminated this summer. This act, which allowed same-sex couples to receive the same tax benefits as heterosexual couples, was recently repealed by a 5-4 majority vote of the Supreme Court. While this vote may demonstrate a shift in the opinion of the American people, it also provides certain fiscal advantages for gay couples. Previously, only states that recognized gay marriage allowed same-sex couples to file federal tax returns as married couples. Now, however, gay partners are permitted by law to file federal returns as married couples in any state regardless of whether that state recognizes same-sex marriage.
The repealing of the Defense of Marriage Act raises questions as to how states will treat same-sex marriage. While some states may not acknowledge these unions, they are now forced to give gay couples the same federal tax benefits as straight couples. Same-sex couples are now able to file their federal returns, either jointly or separately, as married couples and are therefore entitled to the same tax benefits. However, if their state of residence does not recognize gay marriage, then the couple will be unable to file their state return as a married couple. Currently, only Washington D.C. and 13 states recognize gay marriage.
These new tax advantages extend beyond this year’s return. Same-sex couples can go all the way back to the year 2010 to receive their new-found benefits. To file one of these refund claims, taxpayers are instructed to use Form 1040. In addition the tax benefits already described, gay couples no longer have to pay federal income tax on the health insurance benefits received by one spouse when that spouse is claimed as a dependent on their partner’s plan.
Besides the obvious tax savings that are now available to gay couples, there are other small bonuses that come with the IRS acknowledgement of same-sex couples. Such couples can now transfer unlimited funds between one another whereas the allowable amount was previously restricted. In addition, they can now “gift split” which means that each spouse can gift up to $14,000 to a particular recipient for a total of $28,000. Lastly, gay couples are able to make use of “portability.” This enables widows and widowers to add their spouse’s unused estate tax exclusion to their exclusion. However, in order to use the “portability” benefit, estate tax returns must be filed within nine months of a decedent’s death.
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