Now – All Marriages Are Equally Taxing

Now – All Marriages Are Equally Taxing

The IRS told Edith Windsor she owed them $363,000. So she decided to make a federal case out of it.

The liability was a result of the estate tax due upon the death of her same-sex spouse, Thea Spyer. Because the couple had been legally married in Ontario, Canada two years earlier, Windsor claimed she should have the benefit of the marital deduction in calculating the federal estate tax due.

The IRS did not agree. On June 26 of this year the Supreme Court did.

In response to the decision in the case of United States v. Windsor, the IRS has issued Revenue Ruling 2013-17 which rules that for purposes of federal taxation same-sex couples who were legally married in a jurisdiction that recognizes same-sex marriages will be treated the as married under federal tax law.

Now all federal income, gift and estate tax laws with provisions where marriage is a factor must be applied equally to both heterosexual and same-sex marriages recognized in their jurisdiction of origination.

The ruling does not apply to registered domestic partnerships, civil unions or similar formal relationships under state law.

The most noticeable affect on federal transfer tax planning will be the availability of the unlimited gift and estate tax marital deduction

Reconsideration in income tax planning will include issues such as filing status, personal and dependency deductions, the standard deduction, reporting employee benefits, contributions to an IRA, and the earned income and child tax credits.

The ruling is retroactive to the extent that original or amended returns can be filed for prior tax years that are still open under the statute of limitations.

For guidance the IRS has issued answers to FAQs regarding application of the ruling to both same-sex marriages under state law and for registered domestic partners and individuals in civil unions. The actual Revenue Ruling is also available for review.