In a 5-4 ruling from the Supreme Court this morning, same sex marriage was legalized across the country. Many have hailed the ruling as a progression toward equality and will have a huge social impact. From a tax perspective, the ruling will greatly benefit same sex couples in areas where they may not have been able to receive the full tax and financial benefits of marriage.
Previously, the Court had held that same sex marriage was recognized on the federal level as long as the marriage was legal on a state-law level. This caused complications and ambiguity as some states had direct bans on same sex marriage. While federal returns could be filed jointly, each partner would need to submit separate state filings if that state, such as Louisiana, did not allow same sex marriage.
With the new ruling, these consistency issues should no longer be a factor and same sex couples will now receive the same tax benefits and treatments other married couples do across the board for state and federal tax purposes.
Filing jointly offers married couples many significant benefits to both partners and usually allows greater tax savings. An item known as the ‘marriage bonus’ in particular comes into play and allows for a lowered combined tax bill when one party in the marriage earns significantly more. The couple is usually taxed at a lower joint rate, resulting in lower taxes.
Further, same sex partners should now be allowed to receive employee spousal benefits from their partner’s employers, meaning benefits such as healthcare and childcare can now be shared. Also, these couples will now be able to receive the increased home sale exclusion for capital gains purposes, as married couples receive a $500,000 exclusion in comparison to the $250,000 exclusion individuals can take advantage of.