The end of August 2013 saw some big changes for how same sex couples are regarded by the IRS. They will now be able to file a joint federal tax return, regardless of where they live. This means that a couple that is married in a state that legally recognizes gay marriage can move to another state that does not recognize that union. Yet they will retain their federal tax filing status.
On August 29th, 2013 the IRS and the Treasury Department issued a memo stating that if the marriage was legal, they will recognize the couple regardless of where the couple now resides. So for those wishing to file their taxes jointly, they can have the marriage performed in a state that allows gay marriage, yet still live in a state that does not. Those who are married will now have to file their 2013 taxes as either “married filing jointly” or “married filing separately.” The ruling applies to all federal taxes including income, gift, and estate taxes. Furthermore, couples can choose to file an amended return for the tax years 2010-2012.
One of the key provisions to this new rule is that couples may file an amended return for prior years, but they do not have to do so. One might wonder why they would choose not to, and the reason is simple. Married couples often pay a “marriage penalty” tax. Due to rounding, couples that make substantially equal incomes often pay more in taxes than if they were both filing as single. The IRS estimates that although the marriage penalty tax will bring in more revenue, it will mostly be offset by them giving out more partner benefits.
Following on the heels of the Treasury Department and their announcement, is an announcement by the department of Health and Human Services. Their memo states the same rules as the Treasury (if the marriage is legal the couple is recognized regardless of state of residence) in regards to nursing care. Now same sex couples will have equal access to coverage when it comes to Medicare and the nursing home where their spouse lives.
The Social Security Administration, on the other hand, is not following suit. While the other two departments do not give regard to residence address, the SSA requires that the marriage be performed in a state where it is legal, and the couple must reside in a state where gay marriage is legal. Many people would like there to be uniformity amongst the departments, and many critics believe that Social Security will soon change their rules to read similar to the other departments.
Regardless of your view on whether or not same sex marriage should be legal, the underlying fact remains that these couples will now file as married. But are the Treasury’s motives actually pure? The bottom line is that same sex couples are more likely to have similar income levels than opposite sex couples. A similar income level means that they are more likely to pay more taxes as a couple than if they were filing singly. So were the government’s actions a result of the fact that more people are calling for equality, or a result of the fact that they could make more money off gay couples?