State of the Same-sex Union: A Tax Perspective

The U.S. Supreme Court decided that same-sex married couples can now enjoy the same federal benefits as opposite-sex married couples. This means that same-sex couples can claim tax benefits and other rights previously unavailable to them. The decision also stated that same-sex marriages performed in any U.S. or foreign jurisdiction will be recognized for federal tax purposes, even if the couple lives in a state that does not recognize same-sex marriage. So, same-sex couples can now enjoy the tax benefits of being married, no matter where they live. For tax purposes, if two people of the same sex are married, they must file their federal income tax returns as either “married filing jointly” or “married filing separately” starting in 2013. This could result in either higher or lower taxes, depending on their incomes. If they were married in prior years, they can amend their returns to change their filing status. However, the deadline for amending 2010 returns has passed, but they can still amend 2011 and 2012 returns. After same-sex marriage was legalized, states had to figure out how to handle taxes for married couples. Some states have confusing rules about how to file taxes as a married couple, especially if one spouse works in a different state. There are also differences in tax deductions and credits for married couples compared to single people. Even if a state doesn’t have its own income tax, people still need to make sure they are following the rules if they earn income in other states. It’s all quite complicated, and there are still court cases that could change the rules. Most states use federal tax rules to make it easier for people to file their state taxes. Some states allow same-sex couples to file jointly, while others don’t. For example, Arizona requires same-sex couples to file as if they are single, and they have to split their income and file separate state returns. In some states, same-sex married couples are required to file their state taxes as if they are single, even though they file joint federal returns. Some states have specific forms for same-sex couples to re-calculate their federal income if they had filed as single. They may also need to complete additional schedules to determine tax credits. In some states, couples may reference a dummy federal return reflecting single filing status. The Kentucky Department of Revenue said that federal tax changes don’t affect same-sex couples for Kentucky taxes. Same-sex couples legally married in another state have to file separate Kentucky tax returns. Michigan allows same-sex couples to file joint state tax returns, but the Treasury Department says they have to file separately. North Carolina considers same-sex married individuals as single for tax purposes, even though a court ruling said otherwise. In Oklahoma, Alabama, and Missouri, the rules for same-sex couples filing taxes are different. Alabama and Missouri don’t allow same-sex couples to file joint taxes, while Oklahoma is waiting for a court decision. Colorado allows same-sex couples in civil unions to file joint taxes. For federal estate and gift taxes, same-sex married couples can now get benefits, and they should consider amending their tax returns if needed. The earliest year for amending gift tax returns is 2011, and for estate tax returns, it’s for people who died after July 2010. The unlimited marital deduction now allows same-sex married couples to transfer assets to their spouse without incurring estate or gift taxes. This means they can give gifts or leave inheritances to their spouse without worrying about paying taxes on it. They can also split gifts as a couple to take advantage of higher gift tax exclusions. This is a big change and may require them to review and update their estate plans with a professional. If a spouse dies and doesn’t use all of their estate tax exclusion, the leftover amount can be transferred to the surviving spouse. This can help the surviving spouse avoid gift or estate taxes. However, it’s important to file a federal estate tax return to elect this option. The IRS has extended the deadline to file for this until December 31, 2014, for estates of people who died in 2011, 2012, or 2013. So if you’re in this situation, you still have a few weeks to take advantage of this opportunity. State transfer taxes are not only federal estate and gift taxes, but also taxes imposed by many U.S. states on the estates of resident decedents and on property owned by nonresident decedents in that state. Some states also have an inheritance tax on individuals who inherit from a deceased resident. Same-sex spouses may face issues with state estate or inheritance taxes depending on whether their marriage is recognized by the state. Most states recognize same-sex marriage, except for Kentucky, Nebraska, and Tennessee. Gift taxes are only imposed by one state, Connecticut, but it does not apply to gifts between same-sex spouses. In nonrecognition states like Florida, there are state-based benefits available to opposite-sex married couples that are not available to same-sex married couples, such as the right to inherit homestead property and receive an elective share of a deceased spouse’s estate. Changes to state laws may affect these rights, so same-sex couples and their advisors should keep an eye on any changes and update their estate plans accordingly. Overall, while the Windsor decision brought federal benefits to same-sex spouses, there are still complex state tax compliance regulations that may require further legal action. As of now, Florida laws don’t allow same-sex marriage and don’t recognize marriages from other places. Some states do allow it, like Rhode Island, California, and others. In Kansas and Kentucky, there are specific tax guidelines for same-sex couples. North Carolina also has rules about filing taxes for same-sex couples. The passage discusses different tax laws and regulations related to same-sex couples in various states. It also mentions the qualifications and experience of two attorneys, Mark Scott and Scott L. Goldberger. The passage is submitted on behalf of the Tax Section.

Summary: The passage talks about tax laws for same-sex couples in different states and gives background information on two attorneys. It is submitted by the Tax Section.

Source: https://www.floridabar.org/the-florida-bar-journal/state-of-the-same-sex-union-a-tax-perspective/