Tax status complicated for same-sex couples

It’s a whole new financial world for married same-sex couples doing their taxes this year.

Married same-sex couples across the country will file federal tax returns as married couples for the first time this year. On the heels of United States v. Windsor, the landmark Supreme Court case which ruled the Defense of Marriage Act unconstitutional, the Internal Revenue Service extended federal tax benefits to all legally married same-sex couples in August.

Additionally, the IRS tax reform ensures that health care will now be less expensive for married gay couples, since adding a same-sex spouse to one’s health care plan used to be considered a taxable benefit, meaning they would pay more in taxes.

In July 2012, Penn implemented a tax offset to reimburse up to $1,500 of income spent by employees to cover same-sex partners under their Penn medical benefits. According to Terri Ryan, manager of strategic communications for the Department of Human Resources, the University is assessing if the policy will be amended as a result of the ruling.

“Penn’s Division of Human Resources and the Office of General Counsel, with support from the LGBT Center, are currently assessing the impact of this new legislation,” she said in an email.

For now, the main change for legally married same-sex couples is that they can receive federal tax marriage benefits that was once only given to heterosexual couples.

“Tax benefits are probably the most cited benefit for couples to get married … beyond the recognition of their love,” said Kevin Hakakian, a second-year law student and political director of Penn’s Lambda Law organization.

While proponents of same-sex marriage see this as a major victory, a number of questions remain for couples who lived in states like Pennsylvania, where same-sex marriages are not recognized and same-sex couples who were married in other states cannot file taxes as married couples.

“It remains to be seen what states will do,” said Scott Davenport, a 1979 Wharton graduate and COO of Freedom to Marry, an organization which fights for same-sex marriage. Some states may decide to amend their laws to solve the discrepancy. Others, such as Pennsylvania, may not and same-sex couples in those states will have to file state tax forms individually and federal tax forms as a married couple.

2003 Penn Law graduate Eric Klinger-Wilensky, who lives in Pennsylvania, plans to file a joint federal tax return with his husband and an individual state tax return this spring.

Klinger-Wilensky said that the process will be confusing and convoluted. If Pennsylvania allowed him and his husband to file a joint tax return “it would make life easier for my accountant.”

The federal ruling on taxes does not apply to registered domestic partnerships or civil unions. They currently only apply to those who are legally married. Same-sex couples in civil unions or domestic partnerships cannot file their federal taxes as a married couple.

To Davenport this shows why states should allow same-sex marriage instead of just domestic partnerships or civil unions.

“These are second-class unions,” he said.

Klinger-Wilensky agreed, saying, “we will not be fully there on marriage equality until all the states recognize it … We need to finish this.”

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