Treasury, IRS Debut New Tax Rules For Same-Sex Couples

Officials of the Treasury Department and the IRS announced new rules allowing same sex couples who marry in states with gay marriage to file jointly if they move to other states.

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And I'm Melissa Block.

The Treasury Department and the IRS issued new tax guidance today for same-sex married couples. It's the latest in a series of moves by the Obama administration as it seeks to implement this summer's Supreme Court ruling that granted federal recognition of same-sex marriage. The IRS says couples who were married legally will be treated as married for federal tax purposes, even if they live in a state where same-sex marriage is not legal.

NPR's Scott Horsley joins us now to discuss these rules. And, Scott, it's been more than two months now since the Supreme Court issued that ruling. It struck down the Defense of Marriage Act, and it seems we're still sorting out what that means in practical terms. So what's going on?

SCOTT HORSLEY, BYLINE: Well, right, Melissa. Gay marriage is now legal in 13 states and the District of Columbia. And if a same-sex couple gets married and lives in one of those states, it's pretty simple. They get all the benefits. They get all the responsibilities that come with marriage. The wrinkle comes if you're married in one of those 13 states but live in a state where same-sex marriage isn't recognized. Some parts of the federal law - immigration, for example -put the focus on where your marriage took place. Other parts of the law - Social Security - focus on where you live. In general, the federal tax code has followed the law of the state where you live. But with this ruling today, the Treasury Department says forget about that. If you were legally married in one state but live somewhere else, you are still married in the eyes of the IRS.

BLOCK: OK. So what does that mean for same-sex married taxpayers?

HORSLEY: Well, starting next month, those couples will have to file their tax returns either as married filing jointly or married filing separately, just as straight married couples do. And that federal tax status won't change even if they move from one state to another. Now just as with straight couples, married tax status can either be a plus or a minus. It depends on your individual situation. In general, if one partner in a couple is the main breadwinner and the other makes little or nothing, marriage tends to result in a tax savings.

If both partners make about the same amount of money, marriage can result in a tax penalty. Now, for same-sex couples whose marriage results in a tax break, they will now have the option of filing amended returns for up to three previous years and collecting a refund from the federal government. But that's just an option. So if you would end up paying more doing that, you don't have to file your taxes retroactively.

BLOCK: OK, so you've been taking about income taxes. What does the ruling mean for other federal taxes?

HORSLEY: Well, it affects the treatment of estate taxes and gift taxes. Married couples enjoy a tax break when they give gifts to one another or when a surviving spouse gets an inheritance. Those were breaks that unmarried partners don't enjoy. In fact, you may remember it was the legal challenge to an inheritance tax bill by a same-sex partner that led to the Supreme Court's decision...

BLOCK: Yeah.

HORSLEY: ...so the IRS ruling also affects the tax treatment of health insurance that you get from a partner's employer. From now on, the value of that health insurance will be tax free. Overall, the IRS says this will make it easier to administer the tax code since married couples, straight and gay will be treated the same in all 50 states, but it doesn't change the requirements for state tax filing. So some same-sex couples may end up having to work through all those numbers twice.

BLOCK: Oh, boy.

(LAUGHTER)

BLOCK: NPR's Scott Horsley. Scott, thanks so much.

HORSLEY: My pleasure.

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