IRS Recognizes Same-Sex Marriages For Federal Tax Purposes

A couple of months ago, after the Supreme Court ruled that Section 3 of the Defense of Marriage Act was unconstitutional, I explained that there was still uncertainty about the impact the decision would have on couples who are legally married and move to states that do not recognize their marriage, like Texas.

This is because in United States v. Windsor, the Supreme Court did not strike down Section 2 of DOMA, which allows states to refuse to recognize same sex marriages performed in other states.

The Treasury Department provided certainty last Thursday. According to Revenue Ruling 2013-17, gay couples who are married in a state that recognizes the validity of same-sex marriages will be considered lawfully married under the Internal Revenue Code regardless of whether they move to a state that does not allow same-sex couples to marry.

Under the new policy, all federal tax laws and regulations that apply to heterosexual married couples, including income, gift and estate tax rules, will also apply to same-sex married couples, regardless of where they live. The policy does not apply to registered domestic partners and individuals in civil unions.

From an estate planning perspective, same-sex couples can now take advantage of the unlimited marital deduction, which allows an individual to transfer an unlimited amount of assets to his or her spouse at any time without any estate tax liability. They can also take advantage of portability, which allows a deceased spouse to transfer any unused estate tax exclusion to his or her surviving spouse.

The ruling takes effect on September 16, 2013, but couples can retroactively benefit from this ruling by amending previously filed tax returns.