The Supreme Court declared the U.S. vs Windsor case, which the Defense of Marriage Act (DOMA) was created under, unconstitutional. DOMA specifically states that for “federal tax purposes, a marriage means only a legal union between a man and a woman as husband and wife, and the word ‘spouse’ means a person of the opposite sex who is a husband or a wife.” It excluded same-sex mariages, even if the marriage was recognized by the state.
Along with the celebration for the demise of DOMA, legally married gay couples have a thousand and one questions regarding their tax rights because not all states recognize their marriage. Married gay couples who live in states that do not recognize same-sex marriage will not be able to enjoy the same tax benefits as their counterparts living in states that recognize same-sex marriages. States that have legalized same-sex marriages have the same tax laws, irrespective of whether the marriage is between same-sex couples or heterosexual couples.
Complications begin when legally married same-sex couples do not receive the same tax benefits as their heterosexual counterparts because of their location. This poses the problem of the implementation of the new law for the Obama administration.
To effectively implement the changes and block legal loopholes that may lead to legal battles, the Obama administration is working with the Department of Justice. With more than 114,000 legally married same-sex couples in the country, and some states recognizing same-sex marriage and some not, the implementation will also need to consider migration, separation and children. It is still unclear how the IRS will consider married gay couples living in non-equal states.
It is expected that gay married couples living in non-equality states will need to put up with less federal tax benefits than gay married couples in marriage-equality states and heterosexual married couples until the rules are clear.