- How Do Same Sex Marriages Recognized Federally Affect Local Income Tax?
- April 9, 2015 | Author: Timothy K. Spencer
- Law Firm: Weltman, Weinberg & Reis Co., L.P.A. - Brooklyn Heights Office
- In late 2013, the Internal Revenue Service issued Notice 2013-61 providing guidance to employers and employees on how to claim certain refunds or adjust for overpayments on Federal Insurance Contributions Act taxes as well as other taxes and benefits. Since that time, any same-sex couple legally married in any one of the 50 states, the District of Columbia, a U.S. territory, or a foreign country is permitted to file their federal taxes as married. This includes income, gift and estate taxes.
Same-sex couples are also permitted to file refund claims on tax filings going back three years—or from the 2011 filing up to last year's filing. While the now federally-recognized right of same-sex married couples to file as married persons is significant progress in opening up marital rights to same-sex married persons, the manner in which those same same-sex married couples file their state and local income tax returns differs widely based upon where the couple lives. Some same-sex married persons may face inconsistencies in their tax return filings as a result.
While some might assume that whether a state will treat a couple as married for tax purposes depends on whether that state would recognize their marriages generally, this may not be the case. The paradox arises because "most states use a federal definition of income (either federal adjusted gross income or federal taxable income) for purposes of calculating state income taxes."1 As a result, married same-sex couples will file federal returns and calculate federal adjusted gross income and federal tax income under either a joint or married filing separate status. The questions arises, then, whether married same-sex couples will file their state income taxes using the same status, especially in states that do not otherwise recognize their marriages.
For the majority of states, the discrepancy in filing status that exists between federal and state income tax return filing for same-sex married couples is a non-issue. The majority of states either do not have income tax requirements and only tax interest and dividends2, or recognize same-sex marriage.3 For same-sex married couples located in these states, they will either not file a state income tax return or will file under the same status as their federal income tax return. The difficulty will come to those same-sex married persons residing in a state that does not recognize same-sex marriage and does require an income tax return filing.
Same-sex couples residing in several states must file as single despite being married. Arkansas, Michigan, and Mississippi, for instance, do not recognize same-sex marriages and do not conform to federal tax law. As a result, same-sex married persons in these states must as if they were single.4 Some states that do conform their tax laws to federal tax law still prohibit same-sex married couples from filing jointly.
Eight of the fifty states in the U.S. conform to federal tax law but fail to recognize same-sex marriage. Of these states, Georgia, Kentucky, Louisiana, Nebraska, North Dakota, and Ohio prohibit same-sex married couples from filing jointly in some way. In some of these states,5 the state's own department of revenue formally announced that same-sex married couples must file as if they were single. In just one of these states—Missouri—can a same-sex married couple file their state taxes jointly. Same-sex married couples must be aware of their own state position on same-sex marriages to best understand what hurdles they will encounter when filing their state income taxes.
Same-sex married couples married in a state that permits them to legally wed are entitled to file their federal incomes taxes as married persons. Despite the progress reached at the federal level, some states continue to prohibit lawfully wed same-sex married persons from filing jointly. Individuals in these states must be careful to check their own state’s laws on income tax refund filing to ensure proper filing.
2 Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. http://benefitsattorney.com/charts/state-taxes-and-married-same-sex-couples/
3 Alabama, Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Hawaii, Idaho, Illinois, Indiana, Iowa, Maine, Maryland, Massachusetts, Minnesota, Montana, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Utah, Vermont, West Virginia, and Wisconsin. http://benefitsattorney.com/charts/state-taxes-and-married-same-sex-couples/
5 Georgia, Kansas, Kentucky, Louisiana, Nebraska, North Dakota, and Ohio.