Changes to Tax Planning for Same-Sex Couples

As you know, there have been substantial changes to the laws regarding same-sex marriage. Specifically, there have been two recent Supreme Court rulings that provide more information on tax issues. Those two cases, referred to as Windsor and Obergefell, are discussed below.

• On June 26, 2013, the Windsor case stated that federal recognition of marriage wasn’t limited to marriage between a man and a woman, but that states were free to recognize marriage as they chose.
• On June 26, 2015, the Obergefell case stated that same-sex marriage was to be legally recognized in all states and that it was unlawful for a state not to recognize a same-sex marriage performed in another state.

Although these cases didn’t deal with tax issues specifically, certain aspects of the cases do impact taxes for same-sex couples. For instance:

• The law allows for consistent filing status between the federal and state income tax returns. In the past, if your state didn’t recognize same-sex marriage, you could file as a married couple with IRS, but you had to file as two single individuals in your state. The ruling in Obergefell made tax filings much less complicated for same-sex couples.
• Obergefell also stated that same-sex couples are eligible for spousal and survivor social security benefits, regardless of the state in which they reside. This is huge. The potential for a retroactive effect to prior years has not yet been decided, so please stay tuned for more developments in this area.

Our firm doesn’t do much work in the areas of health plans, employee benefits, trusts, estates, and advising on retirement (other than the tax consequences of such). However, in light of these recent changes, we strongly advise our same-sex clients to consult with their HR departments, attorneys and financial planners immediately to ensure that all beneficiary designations, withholding exemptions, and end of life documents such as wills, powers of attorney, and medical requests/emergency situation requests are updated and allowed to accomplish their intended purpose. With more benefits available, it would be a shame to lose them due to improper or short-sighted planning.

Written by

Jonathan Godwin