Changing Definition of Marriage in the U.S.
Over the past five years, the definition of marriage has changed dramatically across the country. With the United States Supreme Court’s decision in United States v. Windsor (2013), Section 3 of the Clinton Administration’s Defense of Marriage Act (DOMA) was declared unconstitutional. As a result, the Internal Revenue Service (IRS) was required to recognize the marriages of same-sex couples performed in states where gay marriage was legal. This decision provided same-sex couples with a host of tax-related benefits, such as the ability to file joint tax returns and transfer or inherit property as spouses.
The Windsor Decision and Unanswered Questions
However, the Windsor decision left one key question unanswered: How would the IRS treat gay couples legally married in one state but living in a state that did not recognize same-sex marriage?
The Obergefell Decision and Its Impact
This dilemma was resolved in 2015 with the Supreme Court’s ruling in Obergefell v. Hodges. In Obergefell, the Court ruled that all states must legalize and recognize same-sex marriages. This means that for the first time, same-sex couples can get married in any state, and all states must recognize those marriages. Consequently, the IRS must now grant the same tax benefits to all married couples, whether gay or heterosexual.
IRS Tax Code Updates
In response to these rulings, the IRS tax code is being updated by redefining the terms “spouse,” “husband,” and “wife.” The new definition, as found in Regulation Section 301.7701-18, reads:
For federal tax purposes, the terms spouse, husband, and wife mean an individual lawfully married to another individual. The term husband and wife means two individuals lawfully married to each other. A marriage of two individuals is recognized for federal tax purposes if the marriage is recognized by any state, possession, or territory of the United States.
Civil Unions and Domestic Partnerships Excluded
Interestingly, the new IRS definition makes it clear that couples—whether homosexual or heterosexual—who enter into a civil union or domestic partnership, as opposed to a marriage, are not considered married for the purposes of federal tax benefits. Many couples choose civil unions or domestic partnerships to retain certain benefits, like Social Security from a previous marriage or to avoid the tax law’s “marriage penalty.”
Tax Consequences for Married Same-Sex Couples
This change presents a challenge for newly married same-sex couples. While the IRS must treat these unions as marriages, couples now must file their taxes jointly or separately, which can mean falling into harsher tax brackets. For example, in 2015, the 33% tax bracket for a single individual began at a taxable income of $189,300. However, for married couples filing jointly, the 33% tax bracket starts at a combined taxable income of $230,450—far from double the amount for single individuals.
A Step Toward Modernization
Despite the potential tax challenges, it’s encouraging to see the IRS modernize its tax code to recognize both same-sex and heterosexual marriages nationwide.
Seek Legal Advice for Marriage-Related Tax Issues
If you have questions about the tax benefits or consequences of your marriage, whether same-sex or heterosexual, or any other family law matter, consult a qualified family lawyer. The attorneys at DiPietro Family Law Group have experience with all family law issues across Northern Virginia and Washington, DC. Contact us today for a consultation at (888) 530-4374.
