After the Windsor Supreme Court case, same-sex couples were regarded as married couples for purposes of filing federal tax returns. Consequently, this court ruling has an implication on the tax filings for 2012 and subsequent years. Married, single, and same-sex persons are treated differently under the tax law in many.
Upon delivering this rule, many same-sex persons are beginning to file for review of their tax returns, a move that will affect Federal and New York State filings for 2012 and beyond. Various scenarios are likely events that will create a twist in the tax collection effort, and they include the following:
- A review of the capital loss limitations, which is $3,000 on combined returns, or $1,500 separate returns
- Changes in passive activity loss whose phase-out is based on joined incomes of same-sex persons who are married.
- Changes in the Social Security benefits that will involve joint incomes of married couples
- A review of the deductions made against student loan interest. There shall be a $2,500 limit on combined returns, and deductions will not be made for separate returns.
- Various aspects may not be available in 2012 and 2013, such as Child Tax Credit, Earned Income Credit, and dependent care credit since joint incomes may not be as high with respect to these particular tax benefits. In the same spirit, they are not to exchange their children for making use of the benefits.
- Previously, same-sex partners were considered as foreign to each other for federal tax filing, but as from 2012, the ruling deems them related through marriage.
- At the time of divorce, the laws will require spousal amount will be treated as taxable income. Before the case was ruled, such payments were not subjected to deductions.
- Savings from 401k and other plans can be transferred to one of the partners in case the other one dies.
In a nutshell, changes in the manner in which same-sex spouses are treated for tax purposes will cause significant changes and demands to review previous tax returns in line with the Supreme Court ruling. This will be aimed at ensuring that tax laws comply with the constitutional recognition of same-sex couples as married as opposed to the previous treatment. As a result, there shall be the need to adjust withholding allowances, checking for discrepancies between state and federal tax returns for capital loss, IRA incomes, passive activity, and pre-tax deductions made by employers on behalf of married couples.