Tax News Highlights: Same-Sex Marriage Tax Implications

| 7/2/2015

On June 26, the U.S. Supreme Court ruled in Obergefell v. Hodges that states must license and recognize same-sex marriage.

The ruling has little impact from a federal tax standpoint. The United States v. Windsor decision in 2013 required the federal government, including the IRS, to recognize same-sex marriages authorized by a state or foreign jurisdiction. The IRS previously issued guidance giving full effect to the decision in Windsor and allowed individuals in a same-sex marriage to file joint income tax returns. Taxpayers should continue to follow this guidance unless or until the IRS issues any additional guidance.

Although the decision in Obergefell should not have a significant effect on federal income tax law, it will have a significant effect on taxpayers and employers in states that did not previously recognize same-sex marriages.

  • The 13 states that have a same-sex marriage ban in place will be required to issue marriage licenses to same-sex couples. The decision has a retroactive effect, so married taxpayers residing in states that did not recognize same-sex marriage might be able to amend to file as married.
  • Individuals in a recognized same-sex marriage in those 13 states also will be afforded the same health and investment plan benefits available to opposite-sex married partners. Employers in those states will need to review their benefit plans for any required changes. Additional guidance is expected to be issued on these items.
  • In most cases, employers will not need to amend prior-year withholding tax returns as Social Security and Federal Insurance Contributions Act withholding generally should not be affected. However, employers should adjust state income tax withholding amounts for same-sex married couples. Individual states are expected to provide guidance on the matter.
  • Obergefell does not affect the treatment of same-sex or opposite-sex couples in a recognized civil union or similar arrangement. Therefore, any couples in such arrangements should continue to follow existing IRS and state law guidance, which generally does not treat such arrangements as a marriage.
  • Obergefell does not address specifically whether states recognizing common-law marriages also are required to give retroactive effect to same-sex couples claiming common-law marriage status. It is likely that such marriages will be recognized retroactively. This could result in a limited opportunity for such couples and their employers to claim refunds for prior tax years.

Taxpayers and employers should plan for the impact of Obergefell on their tax situation. Marital filing status changes generally are effective for the entire tax year, even if the marriage is not recorded until the end of the year. Employers, on the other hand, are not required to revise the employee’s withholdings until formally notified of a marriage.


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