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Tax and Social Security Rules for Same-Sex Couples

Gay and lesbian married couples may now want to start filing for tax refunds and Social Security benefits

By Richard Eisenberg

Same-sex married couples are finally getting some clarity about what the Supreme Court’s recent Defense of Marriage Act decision means for their taxes and Social Security benefits.
Today, in something of a surprise, the U.S. Treasury Department and the Internal Revenue Service declared that the estimated 130,000 same-sex married couples will be treated as married for federal tax purposes regardless of where they now live. It won’t matter whether the couple resides in a state recognizing same-sex marriage or one that doesn’t.
This ruling doesn’t apply to registered domestic partnerships or civil unions, though.
(MORE: New Estate Planning Essentials for Same-Sex Couples)
Mixed News for Tax Bills

While this news ends some confusion about federal income, gift and estate tax treatment for same-sex married couples, it doesn’t necessarily mean their tax bills will fall.

What it does mean is that those couples may – but don’t have to – file original or amended returns saying they want to be treated as married for federal tax purposes on their 2013 returns (they’d either submit returns as “married filing jointly” or “married filing separately.”
In addition, they may be eligible to file for refunds for their 2010, 2011 and 2012 returns, using Form 1040X. To file a refund claim for gift or estate taxes, they'll need to use Form 843.
(MORE: New Financial Planning Essentials for Same-Sex Couples)
The Effect on Health Coverage

The decision to file as a married couple shows up on your federal income return in numerous ways aside from your filing status: your personal and dependency exemptions; whether you can take the standard deduction, the earned income credit or the child care credit; your ability to contribute to an IRA; and how your employee benefits are taxed.
That last one is especially worth noting, since people who bought same-sex spouse health coverage at work and had to pay income taxes on the value of the insurance can now exclude the amount from income. They may then be entitled to a tax refund.


Marriage Penalty and Same-Sex Couples
As Bloomberg’s Margaret Collins and Alison Vekshin recently noted, amending a return to file as a married couple could raise income taxes though, due to the marriage penalty. This would be most likely if one or both of the spouses was in a top income tax bracket or if both had similar salaries.
(MORE: 5 Steps to Creating Your Digital Estate Plan)
What Social Security Is Doing

The Social Security Administration also recently announced it has started processing retirement spouse claims for same-sex couples and paying benefits that were due.
Social Security is still working out some of the kinks regarding DOMA’s implications for same-sex couples.
But according to Holly Deni of the American Society on Aging’s LGBT Aging Issues Network, Acting Commissioner Carolyn W. Colvin said she encourages individuals who believe they may be eligible for benefits to apply for them now.

This way, they can establish their effective date for the start of any benefits that become available after the agency makes its official rulings.

Photograph of Richard Eisenberg
Richard Eisenberg is the former Senior Web Editor of the Money & Security and Work & Purpose channels of Next Avenue and former Managing Editor for the site. He is the author of "How to Avoid a Mid-Life Financial Crisis" and has been a personal finance editor at Money, Yahoo, Good Housekeeping, and CBS MoneyWatch. Read More
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