Same-Sex Couples Look for DOMA Ruling that Could Result in Big Tax Refunds

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DOMA and TaxesSince 1996, when the Defense of Marriage Act (DOMA) was signed into law, same-sex couples have been unable to take advantage of federal couples’ benefits, and they have been unable to file their federal taxes jointly. Even if they live in states where civil unions and marriages are allowed for same-sex couples, the federal filing status and benefits just aren’t there.

But that could change if the U.S. Supreme Court decides to hear arguments against DOMA, and then strikes the law down as unconstitutional. Those hoping to see DOMA struck down are fighting the law based on a couple of grounds: equal protection (Amendment 14), and the Full Faith and Credit Clause (Article IV, Section 1).

Taxes and Same-Sex Couples

Right now, same-sex couples can’t file their taxes jointly, and that means that there are some benefits they miss out on in some circumstances, particularly those circumstances when one partner makes significantly more than the other. Additionally, there are consequences when it comes to estate taxes and when it comes to the way other assets are passed on when one partner dies.

Another issue is that of what happens if you are married in one state and move to another. In general, the Full Faith and Credit Clause in the Constitutions has been used to insist that certain legal transactions (like marriage) that take place in one state are honored in another. However, DOMA allowed an exception to that Constitutional requirement in the case of same-sex marriage. That means that if you live and are married in a state that deems same-sex marriage legal, you get what whatever protections and benefits the state offers to all couples. However, if you decide to move to a state that has outlawed marriage or other unions for same-sex couples, you lose all of the state tax advantages, protections, and benefits you had before.

What Happens if DOMA is Struck Down?

Since 1996, various states have decided to allow same-sex couples to marry, and there is a growing acceptance in society for same-sex couples — and the protection of their legal status. If DOMA is struck down, same-sex couples could see big tax refunds, since some of them likely paid more in federal taxes as a result of the restrictions on their tax filing status.

If arguments related to DOMA are heard (as of this writing, a decision hasn’t been made), and if the Supreme Court does strike down the Act, same-sex couples will be able to amend their tax returns going back three years. This means that they have the chance to amend the 2009 tax returns filed by April 15, 2010 — as long as they do it by April 15, 2013. The amendment would involve changing the filing status, and then refiguring tax burden based on that information.

But of course, if you are part of a same-sex couple, chances are that the Supreme Court isn’t going to have a decision on DOMA by April, even if the body decides to hear arguments on the subject. The good news is that you can actually file what is known as a “protective claim.” You figure out your amended taxes, and then clearly write “protective refund claim” across the top. Then you attach a statement to you refund explaining the basis of your protective claim; in this case, the idea that DOMA might be found unconstitutional is the basis of your protective claim. That way, if DOMA is struck down, you have your amended return filed, and you can get the refund you are entitled to.

(Photo: Guillaume Paumier)

{ 10 comments, please add your thoughts now! }

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10 Responses to “Same-Sex Couples Look for DOMA Ruling that Could Result in Big Tax Refunds”

  1. Oh, protective claim, I hadn’t heard of this. I’ll be telling people.

  2. SLS says:

    But this is only available for same-sex couples who are married, correct? If one is part of a same-sex relationship that is legally sanctioned by the state in which you live – such as domestic partnership – but not a marriage (because you don’t believe in marriage and/or marriage is not legal in your state) you likely do not have the status to make such a protective claim.

    This is why its a problem that there are legal and tax benefits to getting married. All people should have equal access no matter what one’s relationship status is!

  3. thunderthighs says:

    ^ Agree completely with SLS.

  4. Miranda says:

    That’s right. As far as I can tell (and you should probably double-check with a legal expert), it only works for MARRIAGE. And only if DOMA ends up being struck down.

    Also, Texas Wahoo, married couples can file their taxes separately. “Married filling separately” puts you at the same rates as singles.

    • Texas Wahoo says:

      “Also, Texas Wahoo, married couples can file their taxes separately. “Married filling separately” puts you at the same rates as singles.”

      Unfortunately, you are incorrect. If you file as “married filing separately,” you rise into the higher tax brackets more quickly. For single filers, the highest tax bracket starts at $400k, while for married filing singly, the highest tax bracket starts at $225k. The other brackets are similarly unfair towards married couples.

  5. Miranda says:

    *filing not filling 😉

  6. freeby50 says:

    Miranda, no, married filing separately is not equivalent rates to filing single. At least not in the 25% and up brackets. For example the 28% bracket is $85,650 to $178,650 for single and $71,350 to $108725 for married

  7. Miranda says:

    Thanks for the clarification of how married filing single works.

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