Same-sex marriage tax and estate planning tips

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Thousands of gay and lesbian couples are celebrating wedding anniversaries this year. But they might want to add another momentous date to their calendars: June 26.

That’s the day last year that the Supreme Court declared same-sex marriage legal throughout the United States.

The Internal Revenue Service had been accepting jointly filed federal tax returns from same-sex couples married in states that sanctioned their vows since the High Court struck down the Defense of Marriage Act in 2013. The 2015 Supreme Court decision in Obergefell v. Hodges, however, made taxes less of a hassle for gay and lesbian married couples at the state and federal levels regardless of where they live.

Easier tax tasks

Your marital status on the last day of the year determines your tax-filing status. If you are wed on Dec. 31, then you can either file as married filing jointly or married filing separately. It doesn’t matter that you were single for the other 364 days.

And same-sex married couples no longer have to do double duty when it comes to state and federal tax filing. Since the Supreme Court ruling, the joint filing at both levels obviates the need to file differently with a state tax department in a jurisdiction that previously did not recognize the marriages.

Estate planning, too

The historic 2015 marriage ruling also opened up a new world of estate planning for same-sex married couples.

“Today, there are opportunities and protections within reach for same-sex couples that were unavailable during most of American history,” says John O. McManus, founding principal of the New York/New Jersey-based estate planning law firm McManus & Associates.

As the Supreme Court same-sex marriage ruling anniversary approaches, McManus offers some estate planning tips.

Marital deduction plus portability

Same-sex married couples can now take advantage of the unlimited marital deduction from federal estate tax and gift tax for transfers between spouses. This means that, in most cases, one spouse can leave an unlimited amount to his or her surviving spouse without any federal estate tax ramifications.

In addition, the portability provisions of federal gift and estate tax laws generally allow a surviving spouse regardless of gender to use any portion of his or her deceased spouse’s unused applicable estate and gift exclusion amount. This amount is adjusted annually for inflation. For 2016, the amount that skips these taxes is $5.45 million per spouse.

Greater gift splitting

Same-sex married couples also now can enjoy the benefits of gift splitting, says McManus.

The annual gift exclusion amount currently is $14,000. Now a same-sex husband or wife can, with the consent of his or her husband or wife, give a total as if each spouse contributed half of the amount.

This combining of individual allowances lets married couples increase their total gift tax exemption amount.

Generally, gift splitting requires the filing of a Form 709 Gift Tax Return. However, says McManus, if the split gifts total $28,000 or less to each gift recipient, only the donor spouse is required to file a gift tax return.

Get tax, estate help

Note that some states collect their own taxes on estates, separate from the federal estate tax.

This means that while an estate might not be large enough to attract Uncle Sam’s attention, a state tax collector could get a sizable amount in taxes if a person hasn’t made appropriate estate tax plans.

Your legal residence’s tax laws are just another reason for all married couples, regardless of gender, to consult tax and estate professionals. The laws are complex and confusing, but at least thanks to the almost 1-year-old Obergefell ruling, all of us married couples face the same hassles.

Happy anniversary!

You can keep up with tax legislation and other tax news, as well as find filing tips, calculators and more at Bankrate’s Tax Center.

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