The Supreme Court’s landmark decision in Windsor v. United States — in which the court voted 5-4 to repeal a key provision of the discriminatory federal Defense of Marriage Act — paved the way for last week’s Department of Treasury announcement that it will treat all married couples equally for federal tax purposes. Treasury Secretary Jacob Lew said the new rules, which will take effect Sept. 16, will provide “clear, coherent tax-filing guidance for all legally married same-sex couples nationwide.” Even for us here in Pennsylvania, where in many counties someone can still be fired for being gay, we will at least enjoy the federal IRS tax benefits.
The new Treasury-Internal Revenue Service guidelines will apply to all federal taxes, including income, gift and estate taxes. They affect personal and dependent exemptions and deduction, employee benefits, IRA contributions, Medicare Advantage Plans and child tax credits. Ultimately, this means that the 200 provisions of the Internal Revenue Code that reference marriage will be available to legally married same-sex couples living right here in Philadelphia.
This wouldn’t be a legal column if there weren’t a disclaimer! Everyone should seek the advice of a tax advisor, as the IRS “benefits” of marriage may actually cost LGBT individuals money. For tax year 2013, legally married same-sex couples must use the married filing jointly or married filing separately status. Depending on your personal finances, you will either be in a “marriage bonus” or “marriage penalty” situation. In other words, LGBT couples that are upper-middle-class joint filers (usually) will incur the marriage penalty, whereas other couples will enjoy the marriage bonus. For couples in a marriage-bonus situation, you have the option to amend returns filed as far back as three years ago and can seek refunds. You aren’t required to re-file returns if you would pay more. It’s also important to note that the new Treasury tax policy does not apply to those in registered domestic partnerships or civil unions.
The Department of Health and Human Services also extended its benefits to LGBT couples regardless of where they reside, and we can anticipate that more agencies will make the same decision. Agencies handling immigration, federal benefits, veterans affairs and military defense already used the “place of celebration” standard to determine marriage, so same-sex couples anywhere in the United States can avail themselves to those benefits. We anticipate that the Social Security Administration agency will be next to follow suit. Changing from the “place of residence” standard to the “place of celebration” goes against precedent, a sign that progressive change is happening, and it’s happening faster than LGBT advocates and the legal community expected.
To create a system that is truly equal for all citizens, there is still hard work to be done. This huge development will be a key component for pressuring statewide marriage bans, because married couples in non-recognition cannot file jointly for state-tax purposes even though they can for federal purposes, a strong argument that marriage inequality creates a “lesser” class within the state.
Angela Giampolo, principal of Giampolo Law Group, maintains offices in Pennsylvania and New Jersey and specializes in LGBT law, business law, real-estate law and civil rights. Her website is www.giampololaw.com and she maintains two blogs, www.phillygaylawyer.com and www.lifeinhouse.com. Send Angela your legal questions at [email protected].