Same-sex couples who are married can file jointly for federal taxes, but they face a confusing and complicated set of state tax laws.
Attorney Carol Calhoun has put together a comprehensive summary of how state tax laws work for same-sex married couples.
As Calhoun explained in an email to Here & Now:
Nine states have no income tax, or have tax systems that make no distinction between married and single filing status. Of the rest, 14 states and the District of Columbia permit same-sex marriage and require married same-sex couples to file as married. Illinois is allowing same-sex marriages in some counties but not otherwise until June 1, but will nevertheless require same-sex couples who are married in Illinois or elsewhere to file as married. Oregon recognizes same-sex marriages from other states and requires same-sex married couples to file taxes as married, even though same sex marriage is not legal there. Three states that do not otherwise recognize same-sex marriage nevertheless require same-sex couples married elsewhere to file as married, while 22 states require same-sex couples to file as single or head of household, even if they are legally married.
Calhoun told host Robin Young that the situation is “a mess in a couple of ways. We think of it primarily as to the couples themselves, but it also affects their employers.” She calls it “an administrative nightmare” in addition to being a burden on the couples and their employers.
Calhoun says the issue will likely make it back to the Supreme Court, but in the meantime she has some advice for same-sex couples: First, look at your state’s authorities and what they have said about whether you can file jointly. Second, look at court cases that are coming up, because the law in your state may change.
Calhoun is also reminding same-sex couples that under some state laws, they may actually pay higher taxes as a married couple.
Finally, she warns: “One trap for the unwary is that if you are a same-sex couple who lives in a state that does not recognize same sex marriage, you can never get divorced. So you may therefore discover that you are required file taxes jointly with a spouse from whom you are legally separated, who may be living with someone else, who you may not even have any contact with. The situation is extremely complicated.”
- Tax Policy Center: Tax Complications for Same-Sex Couples in Utah (and Elsewhere)
- Carol Calhoun, of the Calhoun Law Group in Bethesda, Maryland.
ROBIN YOUNG, HOST:
It's HERE AND NOW.
Tax returns are complicated. But for same-sex couples, they can be particularly daunting because requirements differ from state to state. Some accept joint returns from married same-sex couples. Others require them to file as singles.
And then there's Illinois, which will only allow same-sex marriages in some counties and, in some cases, only until June 1st. But it requires all married same-sex couples to file as married. Got that?
It's all from a complete summary of state tax laws and same-sex couples put together by attorney Carol Calhoun of the Calhoun Law Group in Bethesda, Maryland. We came across it on the blog TaxVox. And Carol Calhoun joins us from the NPR studios in Washington. Welcome.
CAROL CALHOUN: Thank you.
YOUNG: This is quite something. You start off with all sorts of different categories of states. You know, some in which this is not - this is a moot point, right?
CALHOUN: Yes. We've got really a bunch of categories. One is states in which either there is no income tax at all or in which there is a tax that is totally not dependent on marriage - for example, New Hampshire. Then we've got a group of states that actually have same-sex marriage and allow for joint filings. We've got Oregon, which does not itself have same-sex marriage but recognizes same-sex marriages from other states. We've got a group of states - Missouri, Colorado and Utah - that do not recognize same-sex marriage under their state constitutions. But because their tax systems are tied to the federal tax system, they nevertheless allow same-sex couples to file jointly.
And then we've got a bunch of states that do not allow for same-sex couples to file jointly and have various approaches to how a couple that is required to file jointly on the federal level can sort of separate out their income and add items and subtract items to come up with some kind of income for state purposes.
YOUNG: Ay-yi-yi. It's quite something. But let's back up, because you mentioned states that conform with federal taxes. Start there. This would seem to be the simplest part. What is true about federal taxes and same-sex marriages?
CALHOUN: The Internal Revenue Service takes the position that a couple that was legally married is treated as married for purposes of federal tax law regardless of whether their home state recognizes the marriage, regardless of whether they were a resident of a state that recognized the marriage at the time they got married.
YOUNG: And you say that there are states that recognize the federal thinking. In other words, they take on the same thinking even if they do not have same-sex marriage in their state.
CALHOUN: Correct. In Missouri, there is a constitutional ban on recognition of same-sex marriage, but because the Missouri tax law conforms - they call it conforms - to the federal tax law. In other words, they follow federal tax law principles. The governor has issued an edict that they will recognize same-sex marriage for tax purposes even though not for other purposes.
Utah has the most interesting history. They initially recognized same-sex marriages for tax purposes due to conformity with federal law. Then they reversed themselves and said that they weren't going to recognize same-sex marriages for tax purposes due to their constitutional prohibition. Then they reversed themselves again and are now back to saying that same-sex couples can file jointly in Utah.
YOUNG: This is just really quite something, as we keep saying. But what happens when a state is not coordinating with federal law and couples there, for instance, have to file singly?
CALHOUN: It's a mess. It's a mess in a couple of ways. I mean, we think of it primarily as to the couples themselves, but it also affects their employers. For example, an employer is paying for health insurance for a same-sex couple. At the federal level, the amount that the employer is paying is not treated as income to the employee or the employee's spouse.
YOUNG: The amount of the insurance?
CALHOUN: The amount of the insurance, correct. However, if you are then required to file as single, not only is the couple required to file two separate tax returns, but the employer payment for the spouse's health insurance may become income to that spouse.
YOUNG: So you'd have different incomes on your state and federal forms.
YOUNG: That would seem to trigger a lot of concern.
CALHOUN: Absolutely. It is an administrative nightmare. And it obviously creates all sorts of problems for both the couples and their employer.
YOUNG: Well, the Supreme Court took up one tax question that came out of same-sex marriages. It was the case of Edith Windsor who's being asked to pay taxes on the estate left to her by her wife. The Supreme Court ruled that she should not have to. But how about the question of state income taxes?
CALHOUN: Oh, that's fairly clear. Every district court that has considered the issue so far has struck down a ban on same-sex marriage. If we get even one case in which at the appeals court level goes the other way that allows a state ban on same-sex marriage, you'll have a split in the circuits, at which point the Supreme Court is likely to consider the case.
YOUNG: In the meantime, what is your advice for newly married same-sex couples who have not gone through this tax process before?
CALHOUN: Two things: One is to obviously look at your state's authorities, what they have said with regard to whether you can file jointly. Second is to look at cases that are coming up, because even if your tax authorities have said that you are required to file as single, you may well discover that a district court in your state strikes down that ruling. Another thing you really need to look at is that under some state laws, you may actually pay higher taxes as a married couple.
One trap for the unwary is that if you are a same-sex couple who lives in a state that does not recognize same-sex marriage, you can never get divorced. So you may therefore discover that you are required to file taxes jointly with a spouse from whom you were separated, who may be living with somebody else and you may not even have contact with. The situation is extremely complicated and may be made much simpler if the Supreme Court, in fact, does take one of these cases.
YOUNG: We have actually reported on one, and it just seems like even the states that balk at the idea of same-sex marriage are also going to be so inconvenienced by this disparity in the laws that they'd also be inclined to make them more uniform.
CALHOUN: Oh, absolutely. It's an administrative nightmare to enforce.
YOUNG: That's attorney Carol Calhoun of the Calhoun Law Group in Bethesda, Maryland. Carol, thanks so much for trying to lay it out for us.
CALHOUN: Oh, thank you.
YOUNG: Well, as to returns in general, I'm told most people have filed them. A guy named Barry knows I haven't. If you haven't either and you have questions, leave them in the comment section with this story at hereandnow.org or you can tweet me @hereandnowrobin and we'll answer them in our future segment. You're listening to HERE AND NOW. Transcript provided by NPR, Copyright NPR.