Same-sex married couples and state taxes

Most tax experts expect states that do not acknowledge same-sex marriage to continue to require their residents to file as single or, if they have children, head of household taxpayers.

That's the case in Wisconsin. The state's Department of Revenue website tells its taxpayers that, "Individuals who entered into a same-sex marriage in another state cannot file a Wisconsin income tax return using a tax status of married filing jointly or married filing separately."

Estate taxes, too

The IRS noted in its announcement that its treatment of same-sex couples as married for all federal tax purposes includes estate tax provisions. It was, after all, an estate tax issue filed by a New York widow following her wife's death that led to the invalidation of the DOMA definition of marriage.

Few filers are affected by the federal estate tax because estates valued at up to $5.25 million for 2013 are exempt from taxation. Separate state estate and inheritance taxes, however, could be costly for same-sex couples living in states that do not recognize their marriages.

Twenty states collect estate tax, inheritance tax or both. As with the federal law, most exempt a portion of an estate, typically $1 million or less, from taxation. Where an inheritance tax is in place, spouses and in some cases certain other family heirs are allowed to inherit property without any limits.

Of the states that collect taxes after death, most recognize same-sex marriages. Others grant equal estate and inheritance tax treatment to their residents who are registered civil unions or domestic partnerships. Four states do not recognize any same-sex relationships, meaning gay and lesbian widows and widowers will not be afforded any of the state benefits that their heterosexual counterparts are granted.

Taxation of estates or property left to heirs

12 jurisdictions recognize same-sex marriage and collect estate tax, inheritance tax or both
Connecticut: estate tax
Delaware: estate tax
District of Columbia: estate tax
Iowa: inheritance tax
Maine: estate tax
Maryland: estate tax and inheritance tax
Massachusetts: estate tax
Minnesota: estate tax
New York: estate tax
Rhode Island: estate tax
Vermont: estate tax
Washington: estate tax
3 states allow same-sex civil unions and collect estate tax, inheritance tax or both
Hawaii: estate tax
Illinois: estate tax
New Jersey: estate tax and inheritance tax
1 state allows same-sex domestic partnerships and collects estate tax
Oregon: estate tax
4 states do not recognize same-sex marriage, civil unions or domestic partnerships and collect inheritance tax
Kentucky: inheritance tax
Nebraska: inheritance tax
Pennsylvania: inheritance tax
Tennessee: inheritance tax

Sources: State tax departments and

Young, who is based in Short Hills, N.J., says that in order to get the maximum tax benefit of marriage, same-sex married couples in the Garden State need to register with the state as a civil union and then take a short trip to neighboring New York to get married.

With the civil union, each spouse would be covered under New Jersey's estate and inheritance tax laws. Getting married in New York would solve any federal estate tax concerns since the IRS would accept that ceremony even though the couple formally lives in New Jersey.

Things would be more complicated, however, if the same-sex married couple lived a few miles farther west in Pennsylvania, which has an income tax and an inheritance tax and does not recognize gay marriage, civil unions or domestic partnerships. As Keystone State residents, the couple likely would have to file separate single state tax returns and the surviving spouse would get no state tax protections.

In the many states that do not recognize and in fact specifically ban same-sex marriages, it will likely be some time before gay and lesbian couples there receive equal tax treatment. Young believes, however, that the IRS ruling will put pressure on domestic partnership and civil union states to recognize same-sex marriages.

"For so long states have passed these substitutes in lieu of marriage, saying that couples get the same treatment as married couples. The rationale has always been it's the same thing as marriage," he says. "But it's very clear that it is not the same thing and you do not get the full benefits."

The one thing the IRS ruling does offer, though, is clarity.

"It's clear that it only applies to married couples, not civil unions or domestic partnerships. It's not necessarily the best news, but at least we know," says Young.


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