The IRS bestowed a late-but-welcome wedding gift to same-sex couples Thursday. Starting this year, theyll be treated the same as heterosexual couples when filing and paying their federal taxes, according to a joint announcement by IRS and U.S. Treasury officials.
That means gay and lesbian couples who were legally married in the United States or foreign countries can now file their taxes next April as married filing jointly. And it applies even if the couple live in a state that doesnt allow gay marriage.
The joint announcement by the IRS and U.S. Treasury Department follows a U.S. Supreme Court ruling in June that struck down the federal Defense of Marriage Act, which had defined marriage as between a man and a woman. Under DOMA, legally wed same-sex couples could not file their federal taxes as married. Also, because those marriages werent recognized by the federal government, certain spousal benefits, such as health care for a same-sex partner, were taxed as regular income.
The Supreme Court ruling opened the door for Thursdays IRS announcement.
Perhaps the biggest immediate impact is that a number of married gay couples could be eligible for thousands of dollars in refunds on taxes paid in previous years to cover their spouses health care benefits.
Were sending out mass emails to all our clients, to let everyone know, said Rebecca Harper, a Sacramento financial adviser whose firm, Harper-Davis Financial, specializes in gay and lesbian clients. For those who were legally married, they could go back and recapture the taxes paid on their partners health insurance.
And its no small change at stake. For example, a couple whose employer paid $6,000 a year in health care benefits for their same-sex partner would have paid roughly $1,500 a year in federal taxes, assuming they were in a 25 percent federal tax bracket. In some cases, they could be entitled to about $4,500, said Harper. Those are big numbers, not just a Peets coffee in the morning.
Harpers business partner, CPA Terri Davis, said shes already met with several same-sex couples who are ready to amend their tax returns for the last three years, which is the statute of limitations for filing an amended return.
One couple affected by the ruling is Barbara and Terry Allen-Bresher, whove spent about $200 a month on federal taxes since 2010 to cover Terry on Barbaras CalPERS health care plan. The couple married in 2008 during the brief window when same-sex marriages were first legal in California.
Since shes been on my health care plan, weve paid more than $7,000 in taxes that a similarly-situated heterosexual couple would not have had to pay. They would have paid zero, said Barbara, who said shell likely file amended tax returns for the refunds.
Whether to file an amended return is an individual decision, say tax advisers. It really depends on your income levels. You need to review your prior year tax returns, to see if married filing jointly without claiming the medical insurance taxable income is beneficial, said Davis.
In states that allow same-sex marriage, the ruling simplifies tax preparation for gay and lesbian couples, who will be able to use the same filing status on both state and federal returns. However, the ruling does not apply to registered domestic partnerships, civil unions or similar formal relationships recognized under state law, the IRS said.
More details about the same-sex ruling are on the IRS website, www.irs.gov.
Call The Bees Claudia Buck, (916) 321-1968. Read her Personal Finance blog, www.sacbee.com/personalfinanceblog.