Several announcements last week made it clear that same-sex couples who are legally married will be recognized as married by the U.S. government — even if they do not reside in a state that recognizes same-sex marriages. That’s generally good news for same-sex parents — although there are still a few things to keep in mind. I’m not a lawyer, much less a tax attorney, but several items jumped out at me as things I’d keep in mind (or ask said attorney about).
The IRS informs us that same-sex couples may now claim the child tax credit:
Under the ruling [the U.S. Supreme Court decision of June 26], same-sex couples will be treated as married for all federal tax purposes, including income and gift and estate taxes. The ruling applies to all federal tax provisions where marriage is a factor, including filing status, claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA and claiming the earned income tax credit or child tax credit.
That would seem to apply only for couples filing jointly, however. According to the IRS FAQ on the announcement, it seems that if a couple is married filing separately, only one parent may claim the dependency deduction for the child.
Either way, this flips the documentation burden from married same-sex couples living in marriage equality states to those living in non-equality states. It used to be that my spouse and I, living in Massachusetts, had to file our state (married) form, our federal (single) forms, and create a dummy federal (married) form that let us complete our state (married) form. Now we can simply file state (married) and federal (married), but if we moved, to, say, Utah, we’d have to create a dummy federal (single) form to complete our state (single) forms, although we could now file a federal (married) form. Ugh.
Of course, depending on a couple’s particular financial circumstances, filing as married may or may not be an economically good thing. Personally, I’d rather pay more but be treated equally, though.
If the new IRS announcement means you would have saved money filing as married, though, you may be able to refile for a few previous years as well:
Individuals who were in same-sex marriages may, but are not required to, file original or amended returns choosing to be treated as married for federal tax purposes for one or more prior tax years still open under the statute of limitations. Generally, the statute of limitations for filing a refund claim is three years from the date the return was filed or two years from the date the tax was paid, whichever is later. As a result, refund claims can still be filed for tax years 2010, 2011 and 2012.
Also, we will no longer have to pay taxes on medical insurance from our employers for a spouse:
Employees who purchased same-sex spouse health insurance coverage from their employers on an after-tax basis may treat the amounts paid for that coverage as pre-tax and excludable from income.
Many same-sex parents should also note that expenses for a second-parent adoption cannot be claimed as an adoption credit:
Q8. If a taxpayer adopts the child of his or her same-sex spouse as a second parent or co-parent, may the taxpayer (“adopting parent”) claim the adoption credit for the qualifying adoption expenses he or she pays or incurs to adopt the child?
A8. No. The adopting parent may not claim an adoption credit. A taxpayer may not claim an adoption credit for expenses incurred in adopting the child of the taxpayer’s spouse (section 23).
While it is still unfair that, for both parents to be legal, same-sex couples need to get a second-parent adoption or court order (and should, even if they live in states that permit both of them on a child’s birth certificate), I can also see that the adoption tax credit was meant to incent couples to give homes to children who need them. In second-parent adoptions, that’s not the case, since the child is already in the home. I think there are other ways to relieve couples of the burden of second-parent adoptions, like requiring states to recognize birth certificates and/or de facto parents from other states.
In other good news last week, stemming from the DOMA ruling:
- The Department of Health and Human Services clarified that “all beneficiaries in private Medicare plans have access to equal coverage when it comes to care in a nursing home where their spouse lives,” including same-sex spouses in any state (as long as the marriage was conducted in a state or jurisdiction in which it is legal).
- A federal district judge in California ruled that it is unconstitutional to deny veterans’ benefits to same-sex spouses of veterans.
- The federal Ninth Circuit Court ruled that California’s law banning ex-gay therapy for minors is constitutional and does not inhibit free speech.
- Supreme Court Justice Ruth Bader Ginsburg will officiate at the wedding of Kennedy Center President Michael M. Kaiser and economist John Roberts, the first Supreme Court justice to conduct a ceremony for a same-sex couple.
I have the feeling we’ll see more ramifications of the DOMA ruling in weeks to come. Onward!