How the Supreme Court ruling impacts the finances of same-sex couples

Filing taxes jointly, potentially gaining Social Security benefits are among the changes

Published: June 26, 2015 02:15 PM

Same-sex couples stand to gain considerable financial benefits from the Supreme Court’s decision today effectively legalizing their marriages nationwide. Now, no matter where they live or were married, couples can file their state taxes jointly, file for spousal and survivor benefits through Social Security, and enjoy other financial perks that previously belonged only to heterosexual couples or same-sex couples living in states that recognized their marriages. Among the changes:

Income taxes

Couples now have the option to file both state and federal tax returns as married filing jointly, or married filing separately. In the past two years, the IRS recognized same-sex marriages nationwide and allowed for those options, but states that didn’t recognize their residents’ marriages required same-sex couples to file returns either as individuals or heads of household. That mismatch was confusing and costly, as couples had to file three returns and spend time and money with tax professionals figuring out the discrepancies. (Filing jointly is a double-edged sword; it often, but not always, leads to tax savings.)

Health insurance

An employee no longer has the potential to be taxed extra on the value of employer-provided, family health insurance. In the past, same-sex couples living in a state that did not recognize their marriage could find that benefit taxed on the state level as ordinary income; health benefits for heterosexual couples were not similarly taxed. (Federal taxation of health benefits was eliminated after the last Supreme Court decision on same-sex marriage in 2013.)

Social Security

One spouse can now file for spousal and survivor retirement benefits on the work record of the other spouse, and potentially take advantage of sophisticated claiming strategies that can add thousands to their retirement benefits. In the past two years since the last, somewhat ambiguous, Supreme Court decision on same-sex marriage, Social Security had said it would only allow those claims from couples that were domiciled in states that recognized their marriages.

Karen Loewy, a senior attorney for Lambda Legal, national legal organization advocating for the LGBT community and people living with HIV, noted that Social Security still needed to clarify how the new ruling would affect some prior claims for same-sex spousal and survivor benefits. For example, someone living in a state that did not recognize same-sex marriage at the time he or she applied for survivor benefits still might be at risk of not receiving those benefits. "We’re hoping that the Social Security Administration will recognize that basing their spousal determinations on state laws that are now held unconstitutional are similarly impermissible,” Loewy said. Lambda Legal is involved in two pending cases on that topic, in federal district courts in the Illinois and the District of Columbia. 

Married couples get some nice financial perks. Read more about the tax benefits of marriage

Gift taxes

Couples already benefit from the federal gift-tax exclusion (currently $14,000 per year), allowing each partner to give that amount to any number of relatives without incurring the gift tax. Now those gifts are eligible for applicable state gift-tax exclusions, too.

Retirement planning

The decision could encourage more people who physically or financially could not travel to wed out of state to get married locally, Loewy noted. As a result, more people could now gain access as beneficiaries to private retirement accounts, or to previously-denied spousal benefits through state and local government employers. “For folks who hadn’t been able to marry, being able to marry now will hopefully give them access to greater retirement protections,” Loewy said. “To be able to just go to city hall and have those protections in place can have a huge impact.”

Lambda Legal has partnered with several organizations to outline the impact—financial and otherwise—of today's decision.

—Tobie Stanger (@TobieStanger on Twitter)

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