Equality Before The Taxman

by Patrick Appel

This is wonderful news:

According to a big new announcement from the IRS and the Treasury Department, if you’re a legally married gay couple, the federal government will recognize your marriage — even if you live in a state where your marriage isn’t legal.

The statement, released by the Treasury Department Thursday, says that department and the IRS will use a “place of celebration” rule in recognizing same-sex unions (recognition that was illegal before the Supreme Court struck down part of the Defense of Marriage Act last month). That means that the U.S. government recognizes a marriage if the union was legally recognized in the place where it occurred, where it was celebrated. That’s true even if the married couple then lives in a state where gay marriage is illegal.

Steve Benen spells out why this a big deal:

The new policy 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.

This is no small development.

Under the old policy, if a same-sex couple in Vermont gets married, then moves to Florida, they would no longer be treated as married under tax law. Now, no matter where a same-sex married couple lives, that family can take comfort in knowing they’ll be treated equally under federal tax law.

June Thomas considers other consequences of this decision:

As Matthew Yglesias recently wrote, a willingness to relocate is essential in times of high unemployment, and married gay men and lesbians shouldn’t suffer a loss of rights if they need to move to a state without marriage equality. It’s also good news for the 13 states that, along with the District of Columbia, perform same-sex marriages: Any same-sex couples who want to tie the knot but live in a marriage-denying state would be well-advised to give up on waiting for their state to see sense and spend their wedding dollars in a more welcoming jurisdiction.

Barro notes that same-sex married couples can amend old returns:

[O]ne key component of today’s announcement is that the IRS will accept amended tax returns from gay couples going back as far as 2010. If you filed previous years’ taxes as single because the IRS didn’t recognize your marriage, you can go back and change old tax returns to say you’re married—but only if you want to.

Gay couples will presumably only take this option if doing so gets them a tax refund. Typically, that would happen for one of two reasons. If the spouses had highly unequal incomes, it’s likely they missed out on a marriage bonus, because graduated tax brackets kick in at higher levels for couples than singles. Or, if one spouse put the other on his or her employer-provided health plan in previous years, amending old returns will allow the couple to deduct the cost of that spousal health benefit from tax.

Since only couples getting refund checks will be likely to amend, the IRS decision is likely to cause a short-run revenue loss. But it will be made up in the future, when same-sex married couples have to file their taxes as married whether they want to or not.

Finally, Linda Beale examines remaining legal inequalities:

In spite of the relief this federal ruling provides, same-sex couples will still face enormously complex legal issues because of the states that discriminate against such couples.  They may have adopted children in the state in which the marriage was celebrated, but they may move to a state that doesn’t recognize gay marriages and doesn’t permit gay adoptions.  What kind of issues will that raise?  They may be able to transfer property at death without probate in their home state, but not in their new state of domicile.  All of these issues continue to argue for an equal protection right to gay marriage and the rights and obligations that correspond to it, as well as sister state comity in recognizing gay marriages conducted in other states.