Did you know the decisions made by the highest court of the land, The Supreme Court, not only change the law, but have an effect on taxes? Just last month, The Supreme Court struck down the Defense of Marriage Act, DOMA. The case, U.S. vs. Windsor, was basically a tax case about nearly $400,000 in taxes owed on the estate of a same-sex couple. But the decision now means that same-sex couples have some of the same tax rights as everyone else.
If you’re an employer, DOMA could affect your payroll and employee benefits. So, here are some of DOMA’s tax-based benefits you should know about:
JOINT RETURNS – Same-sex couples can now file joint federal tax returns if they live in a state that legally recognizes their marriage. But does filing a joint return benefit same-sex or any couple? It depends. If both people make high taxable incomes, it may be more beneficial to file separately. Same-sex couples may also want to consider filing amended returns for prior tax years.
ESTATE TAX DEDUCTION – DOMA also means the partner in a same-sex marriage can claim the marital deduction. This means the partner’s estate passes tax-free to his or her spouse.
TAX-FREE EMPLOYER BENEFITS – The Supreme Court’s decision allows those in same-sex marriage to exclude from their income tax-free employer benefits, which means same-sex couples can now claim refunds.
FEDERAL EMPLOYEE BENEFITS – Married same-sex partners are eligible for federal benefits if their partner is a federal employee.
SOCIAL SECURITY SURVIVOR BENEFITS – Same-sex couples are now eligible to claim social security survivor benefits upon the death of their partner.
While there are many benefits to DOMA, there are still a lot of uncertainties, especially for same-sex couples who live in a state that doesn’t recognize same-sex marriages. For example, what happens when a same-sex couple has a child and one spouse has filed as head of household in the past and received child tax credits? How will DOMA affect employment benefit plans for employees in different states that do not recognize same-sex marriages?
There are still many changes happening and hopefully the IRS will offer guidance to same-sex couples and employers in the near future. Until then, if you need help maneuvering through the tax implications of DOMA on your family or your business, e-mail or give us a call. The DM Accounting team is up to date with the latest tax codes and is here to help.
Have a wonderful week!
