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United States v. Windsor
The current gap in tax rules for some same-sex married couples dates to a Supreme Court decision in 2013, United States v. Windsor, which struck down part of the Defense of Marriage Act.
The ruling required the federal government to recognize same-sex marriages in states where they were legal.
Following the Windsor case, the IRS issued guidance that let taxpayers amend their tax returns with respect to their marital status, but only generally back to 2010, according to a Nov. 3 summary of the Build Back Better Act.
However, same-sex marriage was legal in five states (Connecticut, Iowa, Massachusetts, New Hampshire and Vermont) plus Washington, D.C., before 2010, according to the Pew Research Center.
(Massachusetts became the first state to legalize the unions, in 2003, after its Supreme Judicial Court ruled that the state constitution gives gay and lesbian couples the right to marry, according to Pew; weddings began in 2004. The U.S. Supreme Court later legalized same-sex marriage nationwide, in 2015, in Obergefell v. Hodges.)
Gay and lesbian couples who legally wed before 2010 would be able to file an amended tax return if Congress passes the Build Back Better Act with the provision intact.
This is a fair thing to do.
Steve Warnoff
director of federal tax policy at the Institute on Taxation and Economic Policy
“This is a fair thing to do,” said Steve Wamhoff, director of federal tax policy at the Institute on Taxation and Economic Policy. “People were married [but] the federal government wasn’t recognizing their marriages.”
While fair in terms of tax policy, it’s questionable whether many couples would make the effort to redo their tax returns and take advantage of new rules, Wamhoff said.
Marriage penalty
It’s also not a given that all married couples would benefit from filing a joint return instead of as single taxpayers.
Same-sex couples who’d benefit most from new rules would likely be those in which one spouse is a high earner and the other has little to no income, Levine said.
That’s largely due to the so-called marriage penalty, which is most common when each spouse earns a similar income.
For example, in 2004, single taxpayers were in the 28% tax bracket if their income exceeded $70,350. However, instead of a level twice that amount, married couples filing a joint tax return hit the 28% rate once income exceeded $117,250.
That basically meant married couples jumped into that tax rate more easily with respect to their income. (There’s still a marriage penalty, but a federal tax law in 2017 temporarily eased it.)
Married couples may also be able to claim certain tax benefits unavailable to single filers, Levine said.
For example, if a higher-earning spouse had paid for medical or education expenses for the other spouse pre-2010, the high earner couldn’t claim medical or education tax breaks for those costs on their individual return, Levine said. They’d perhaps be able to do so on a married-joint return.
