In June 2013, the U.S. Supreme Court overturned the Defense of Marriage Act (DOMA), paving the way for same-sex married couples to receive federal benefits. Even though Arizona does not recognize same-sex marriage, the ruling still affects you if you’re part of a same-sex couple.
For one thing, you and your spouse can now file jointly on federal taxes. In most cases, this means lower overall taxes for the two of you. However, if you both earn high incomes, you may be hit with the “marriage penalty,” which represents additional taxes you wouldn’t pay if you filed taxes as single individuals.
Previously, if one of you died and left your assets to the other, you would owe a 40 percent tax on estates worth more than $5.25 million. Now, either of you can transfer an unlimited amount without worrying about any taxes. The decedent’s retirement plan can also roll over to the survivors’ without taxes. While you’re both alive, you can sell land to each other without worrying about capital gains taxes.
Military benefits, including housing allowances, veteran’s benefits and health care plans apply to same-sex spouses of Armed Forces personnel. Health care and additional benefits that used to apply only to spouses of opposite-sex spouses of federal employees now apply to same-sex spouses as well.
The federal tax and financial laws are evolving quickly to account for the Supreme Court decision. It is likely that many of Arizona’s laws will follow suit. If you want to know how these changes affect your tax or financial planning situation, contact us.