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Same-Sex Marriages Legalized: Tax Plan Updates

Posted on: July 15th, 2015
LGBT tax planningThe landmark court decision in Obergefell v. Hodges made same-sex marriage legal across the United States. Married LGBT couples had been recognized for tax purposes by the federal government for approximately a year and half prior to this court ruling. Previously, United States v. Windsor ruled that same-sex marriages would be recognized for federal tax purposes. However, couples across the country who reside in states that had not recognized their union faced complicated and frustrating tax filing requirements and many did not enjoy the tax benefits of marriage on the state level.

With the legalization of same-sex marriage from Obergefell v. Hodges, now every state must afford equal rights. Previously, married LGBT taxpayers in North Carolina (and several other jurisdictions) filed a joint federal tax return, but were only allowed to file as ‘single’ on the state tax return. Our North Carolina tax attorneys reviewed more about that past tax filing process here. Now that married couples—regardless of gender—can file taxes using a married filing status, what should same-sex couples review or change in their tax plan?
  1. Prior tax returns. A tax attorney can review prior year federal and state tax returns to determine if there is a significant benefit to filing amended returns. Amendments might make it possible for couples to contribute more to Roth IRAs or take advantage of tax deductions that they had not been eligible for previously due to adjusted gross income limitations. 
  2. Gift tax. All United States taxpayers can give up to $14,000 annually tax-free (as of 2015 tax year rates). Any amount equal to or over this figure is not included in the taxpayer’s annual gift tax exemption. Married couples who file jointly can enjoy both spouses’ exclusion amounts, up to $28,000 total for the 2015 tax year. Same-sex married couples can now structure gifting plans to family and friends with these additional tax benefits. The gift tax exemption amount varies on the state level; North Carolina’s gift tax was repealed in 2009. 
  3. Social Security benefits. Now that married same-sex couples are afforded the same rights as heterosexual couples, they will also enjoy Social Security benefits – which USA Today estimates can add between $20,000 to more than $250,000 in lifetime benefits that were previously unavailable to same-sex couples. The additional income could affect a couple’s adjusted gross income, eligibility for public benefit programs, and other matters. Forecast and review with a tax attorney to learn how best to structure assets with respect to benefits. Consider benefits that might be due in a number of circumstances, such as in divorce from an ex-spouse or a surviving spouse of a deceased worker.

A revised tax plan should take into account the items above, as well as a comprehensive review of a couple’s assets and long-term goals. LGBT couples have more opportunities legally available to them, and having proper counsel can help avoid missing a tax break or other benefit. Individuals who are concerned about how the new laws affect their tax requirements can contact one of our tax attorneys to schedule a review.

By Attorney Samantha Reichle
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