New Tax Law After Same Sex Ruling
The Supreme Court recently declared the Defense of Marriage Act unconstitutional. This means that, in some states, same-sex couples who are legally married can now receive the same Social Security, retirement and health care benefits that have long been available to heterosexual couples. The ruling could even lead to a check from Uncle Sam for some! This article discusses the financial and tax implications of this new ruling for same-sex couples.
Gift Taxes and Estate Planning
Gift and estate taxes have been a core issue for many same-sex couples. Since there was previously no federal recognition of same- sex couples, members of these unions were not able to pass their assets on to their spouses upon their death without being taxed. Now some same sex couples will be able to share the same spousal estate benefits that straight couples have enjoyed. The new ruling also makes it possible for married same-sex couples to share assets without having to pay gift taxes. This has been a problem in the past when a same sex-couple shared a house and split mortgage payments. Same-sex couples may want to consult with their tax professionals to make sure their estates and trusts are updated to take advantage of any new estate or tax benefits provided by the new laws.
Health Care Benefits
One of the greatest benefits of the new legislation is that a member of a same-sex union can now be recognized on their partner’s health insurance plan without the large fees that were added in previous years. In addition, same-sex couples can now elect a variety of more affordable and flexible health care plans with better rates. Even if a couple is happy with their current health insurance arrangement and chooses not to change plans, they may be eligible to file amended tax returns to collect taxes that have been paid on benefits in prior years.
Income Taxes
Until recently, same-sex couples were not able to file joint tax returns and thus had larger tax bills than heterosexual couples. One couple said they paid an additional $5,000 in taxes because they could not legally marry. As a rule of thumb, married couples pay less in taxes than individuals filing separately. This is especially true when one person in a couple earns significantly more than the other. In addition, married couples filing joint tax returns realize other tax benefits in areas such as capital gains taxes, child care credits and a larger exclusion for the sale of a home. These tax benefits will now be available to some same-sex couples. Although the new Supreme Court ruling potentially offers many tax benefits, same-sex couples may want to consult with a tax professional to see how it affects their specific set of circumstances.
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