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Same Sex Marriage and Tax Law

By Nathan Vinson, Attorney 
English, Lucas, Priest and Owsley, LLP

just married photoAs early as 2000, states began grappling with the issue of same sex marriage. Some states allowed unions. Some allowed marriage. Some didn’t allow either. Now, with the U.S. Supreme Court’s decision in Obergefell v. Hodges, all states must allow and recognize same sex marriages. So moving forward, what happens at tax time if you’re married in one state but live in a state that previously didn’t recognize same sex marriages?

The American Bar Association offered an online Continuing Legal Education seminar by attorneys Patricia Cain and George Karibjanian recently to help tax attorneys sort through some of the more difficult legal issues surrounding same sex marriage.

It’s been a mess, frankly, for same sex couples.

The Federal Government has recognized the legitimacy of same sex marriages since the first state, Vermont, allowed same sex unions in 2000. This means that the Internal Revenue Service allowed same sex couples to file federal tax returns as married couples – even if the state where they resided didn’t recognize the marriage. So, a couple could be married on their federal return but not on their state return. This was true for same sex couples in Kentucky. So, how exactly do you handle that as a tax attorney or tax preparer? And what if the couple has adopted a child? Who claims the deduction? There have been so many thorny issues for same sex couples when it comes to taxes.

What remains to be seen for those couples and for tax lawyers such as us is how individual states will handle this going forward. Kentucky did not have legal same sex marriage prior to the U.S. Supreme Court ruling, and, like all states, now does. Can couples go back and amend past tax returns for prior years and possibly get refunds?

What about this scenario, outlined in the CLE:

Can a state go after a same-sex married couple to assert deficiencies (within the statute of limitations) if recognition of the marriages would have increased their tax bill? For example, what if they claimed mortgage interest that might have been denied if they were married?

Then, there are the estate questions, and there are many, but one thing is clear to us: if you are a same sex couple who was married in another state because your home state didn’t recognize same-sex marriages, you definitely need to look over your estate plans and documents soon. Your wills, power of attorney, trusts and many other documents need to be reviewed, especially in light of the changing tax climate this ruling will bring. If you’ve been part of a same sex couple (same home) for many years but not gotten married, you may already be married under common law. If so, it’s wise to check with an attorney about what kind of laws may apply to your relationship and to plan for the future.

If you are thinking of getting married now that same sex marriages are legal in all states, we highly recommend a prenuptial agreement to handle any future issues that may arise.

Same sex marriages are now, in the eyes of the law, every bit as legitimate as heterosexual marriage. If you’re part of a same sex relationship, it is wise to begin to think about what the future holds for you as a couple and make plans that take into account all of your joint assets. We would be happy to assist you in planning for the future of your relationship. Contact me, Nathan Vinson, at nvinson@elpolaw.com or (270) 781-6500 for more information on how to proceed.