IRS Says Same-Sex Couples Entitled to Same Tax Benefits as Straight Couples

August 29, 2013 at 12:00 AM EDT
In reaction to the Supreme Court's decision to strike down part of the Defense of Marriage Act, legally married same-sex couples are now entitled to the same tax benefits as straight couples, regardless of where they live. For more on the IRS policy change, Judy Woodruff talks to Brian Moulton of the Human Rights Campaign.

JUDY WOODRUFF: And we look at new rules on same-sex marriage and the equality of tax benefits. The issue has long been an important and practical concern in the financial lives of many couples.

Today, the Treasury Department and the IRS announced that legally married same-sex couples can filed joint returns and will receive the same tax benefits as straight couples, no matter where they live in the U.S. The change comes as the federal government continues to implement this summer’s Supreme Court ruling that struck down the federal Defense of Marriage Act.

Brian Moulton is the legal director for Human Rights Campaign. The group works on behalf of civil rights matters of importance to the LGBT community.

And welcome to the program.

BRIAN MOULTON, Human Rights Campaign: Thank you.

JUDY WOODRUFF: So how significant a development is this for same-sex couples?

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BRIAN MOULTON: It’s a very big deal for same-sex couples.

Really, once the Supreme Court made its decision this summer, the agency that our community most wanted to hear from was the IRS. And I think that’s because it’s the one federal agency that everybody deals with once a year at least, and there are some real financial ramifications to the tax inequalities those couples were facing.

JUDY WOODRUFF: So, in brief, what is changing here? How did the federal government look at these marriages before and how do they look at them now in terms of taxes?


Well, certainly, before the Supreme Court decision this summer, these marriages didn’t exist for federal purposes. Lawfully married same-sex couples were ignored completely by the federal government because of the Defense of Marriage Act.

After the decision, really, the answer — or the question we still needed an answer to was what would they do about particularly married couples who live in states that don’t recognize their marriages. So, you got married in the District of Columbia, for example, but you live in Virginia. What about those folks?

And the question was really because in the past the IRS had often looked to the law in the state where someone lived to determine if they were married for federal tax purposes.

JUDY WOODRUFF: So this means if you’re — again, if you’re living in a state that doesn’t recognize same-sex marriage, but you as a couple were married elsewhere, and that marriage was recognized legally at the time, you get to file as if you were a straight couple.

BRIAN MOULTON: Exactly. You’re a lawfully married couple for federal purposes, in this case for tax purposes.

JUDY WOODRUFF: So, we’re talking about — Brian Moulton, we’re talking about income taxes and what other federal taxes?

BRIAN MOULTON: Gift and inheritance taxes. So, really, obviously, the income tax is something everybody is familiar with dealing with, but any of the ways that the federal government takes a piece of income or other funds that come into your life through other processes.

JUDY WOODRUFF: So, give maybe an example. Say a couple married in one state, happened to be living now in a state that doesn’t recognize same-sex marriage. What would be the financial implications for them?


Well, certainly, you know, a great example is the — Edie Windsor’s example, the woman who was the plaintiff in the case in front of the Supreme Court. She was married. Her wife died. She inherited her wife’s estate. And she wasn’t granted the spousal exemption to the federal estate tax because she wasn’t considered a spouse for federal tax purposes, which meant a $363,000 tax bill for her that now, because of the decision and the IRS’ ruling today, she won’t have to pay and couples like her won’t have to deal with.

JUDY WOODRUFF: And now — and what about across the board? Does this mean a tax reduction for most couples or what?

BRIAN MOULTON: Well, it’s going to be a mix, because it’s all about your own financial circumstances. Some people who file jointly are going to end up paying more taxes. Some will pay less.

Some will have access to exemptions from taxes that they would have otherwise have paid. For example, if you get employer-provided health benefits for your same-sex spouse, up until now, those were taxed as if they were more income for you, unlike spousal benefits for a straight spouse. Now those won’t be taxed anymore, and that is going to be a benefit for those families.

That’s about $1,000 a year in taxes on the average that people were paying that they won’t have to pay now.

JUDY WOODRUFF: So, it really does depend on your individual financial circumstances?

BRIAN MOULTON: Absolutely.

JUDY WOODRUFF: Still, though, there can be a difference between what the state recognizes and what the federal government recognizes. So, even though this may change the way they file federally, it’s still — they’re still going to, when it comes to state taxes, be affected by this.

BRIAN MOULTON: Right. Exactly.

So, if you’re a lawfully married couple, but you live in a state that doesn’t recognize your marriage and the state has an income tax, you are still going to be treated for that state income tax purpose as single people. You’re not a married couple in the eyes of that state, and you will still have to pay your taxes for the state that way.

JUDY WOODRUFF: And tell us, when does this take effect?

BRIAN MOULTON: So, the ruling, the IRS tells us, is effective September 16 of this year. But there are folks who got an extension from their 2012 taxes in April to October. There are people who can take advantage of a process the IRS has to look back to the last three years and amend returns.

So this can affect what has happened in the past for married couples. But, for going forward, it really is going to be most for people filing their taxes next April.



JUDY WOODRUFF: And, finally, what other federal laws, federal regulations is the LGBT community looking to potentially change in the federal government? What about Social Security benefits, veterans benefits? Where do those stand?


So, there are still a lot of agencies out there we haven’t heard from about how they are going to implement this summer’s Supreme Court decision. And those are a couple of big ones, Social Security and veterans, where there are rules in their — in the statutes that govern those programs that tell those agencies to look at the state in which people live to decide if they are married for federal purposes and for purposes of those particular programs.

And those are big programs for people, particularly older people, and so we’re definitely still anxious to hear from those agencies about what are they going to do and what might still need to change to really recognize all lawfully married couples.

JUDY WOODRUFF: But, in the meantime, today’s announcement a big one.

BRIAN MOULTON: Absolutely.

JUDY WOODRUFF: Brian Moulton with the Human Rights Campaign, thank you.