For many same-sex couples living in Minnesota, filing taxes in 2014 is going to be very different—and possibly much more rewarding.
The background: In May 2013, Minnesota moved to legalize same-sex marriage, paving the way for ceremonies to begin August 1st. Shortly after the state senate’s ruling, the Supreme Court ruled Section 3 of the Defense of Marriage Act unconstitutional, meaning that the federal government must recognize same-sex marriages in states where it is legal.
This means that same-sex couples in Minnesota who decide to get married will be allowed to file a joint federal tax return in April, as will other couples who are married in one of the 13 states where same-sex marriage is legal. They will also be eligible for many other financial perks of marriage, including:
- Possible tax benefits. Some married couples pay less taxes when filing jointly (this depends on each spouse’s income).
- Equitable estate planning. Same-sex couples can now opt for the estate tax marital deduction in the event that a spouse dies.
- No gift taxes. Spouses can transfer finances and property to one another without paying income or gift taxes.
- Lower health insurance costs. Most employers that offered health coverage for same-sex partners taxed this benefit; new federal regulations will allow coverage for same-sex spouses to be tax-free.
- Child-related tax credits. Families headed by same-sex parents may receive child-related tax credits by claiming children as dependents on a joint return. In addition, filing as head of household on a joint return often results in less taxes than accrued by two partners filing separately.
In fact, the overturning of DOMA may open up so many benefits that couples who have been married for some time (and live a state where same-sex marriage is recognized) may want to re-visit past finances to find opportunities for refunds. The IRS allows taxpayers to amend tax returns for up to three previous years, and many couples are consulting financial advisors to re-visit past returns.
Want to learn how the new federal regulations will affect you and your spouse? Contact us to set up an appointment.