The U.S. Treasury Department and Internal Revenue Service jointly announced that, for tax and benefits purposes, the federal government considers same-sex couples “married”- provided they were legally married in a jurisdiction that performs such ceremonies. This includes a marriage performed in any of the 50 states that allow same-sex unions, Washington, D.C., a U.S. territory or a foreign country.
Importantly, the statement clarifies it doesn’t matter whether a couple currently lives in a jurisdiction that recognizes gay marriage.
However, the ruling “does not apply to registered domestic partnerships, civil unions, or similar formal relationships recognized under state law.”
In written remarks, Treasury Secretary Jack Lew said the “ruling provides certainty and clear, coherent tax filing guidance for all legally married same-sex couples nationwide. It provides access to benefits, responsibilities and protections under federal tax law that all Americans deserve."
He added this “also assures legally married same-sex couples that they can move freely throughout the country knowing that their federal filing status will not change.”
The ruling comes in the wake of the landmark U.S. Supreme Court decision in late June which struck down a key part of the Defense of Marriage Act. That law specified “marriage” only applied to legal unions of heterosexual couples. The high court declared that provision violated the “equal protection” clause of the Constitution.
The financial implications for this ruling are both broad and significant. Same-sex couples will want to re-visit wills and estate plans they have created. They should also review the beneficiary designations on all retirement plans, including employer-sponsored 401(k)s, 403(b)s, 457 plans and all types of IRAs.
Starting with this year, legally-married same-sex couples “generally must” file their federal income tax return as either “married filing jointly” or “married filing separately.” They should also consider amending tax returns filed in previous years if this would result in a lower combined tax bill.
The statute of limitations on amending a return is three years from the date it was filed or two years from the date you paid the tax- whichever is later. This means you can potentially go back as far as your 2010 return. However, tax experts recommend you file “protective claim” with the IRS to ensure that time does not run out as far as 2010 returns are concerned.
You can also file a claim to get estate or gift taxes refunded.
If you bought coverage for a same-sex partner through a company health plan you might also be able to get a tax refund based upon your newly-recognized marital status.
Both the Treasury and IRS will begin implementing the ruling on September 16.
Other federal agencies will be issuing guidance concerning the programs and policies that they administer.
Ms. Buckner is a Retirement and Financial Planning Specialist and an instructor in Franklin Templeton Investments' global Academy. The views expressed in this article are only those of Ms. Buckner or the individual commentator identified therein, and are not necessarily the views of Franklin Templeton Investments, which has not reviewed, and is not responsible for, the content.
If you have a question for Gail Buckner and the Your $ Matters column, send them to: email@example.com, along with your name and phone number.