Q&A: What gay marriage ruling means for taxes, benefits

United States v. Windsor, the Supreme Court decision striking down Section 3 of the Defense of Marriage Act, was obviously of huge symbolic importance for LGBT Americans, but as we’ve been stressing this week, it matters in practical terms as well. The most immediate consequence is that Edie Windsor gets her $363,053 in estate-tax payments back. But thousands of other same-sex married couples will see their lives change in ways big and small because of the federal government’s recognition of them. Here are some specifics:

Q: Which couples does this affect?

A: Everyone who has a legally issued marriage license, even if obtained abroad (Windsor married her wife in Toronto).

Q: But let’s say you live in a state that doesn’t recognize your marriage, such as Virginia, but got married in a place where same-sex marriage is legal, like D.C. Does anything change?

A: Maybe. As a fact sheet issued after the ruling by LGBT rights groups explains, federal laws differ in whether they place priority on the “place of residence” (in this hypothetical, Virginia) or the “place of celebration” (in this case, D.C.). Immigration law tends to focus on the latter, while the IRS and Social Security focus on the place of residence.

The Obama administration has initiated a regulatory review meant to sort this out, and LGBT rights groups are pushing to make the “place of celebration” standard the norm, to enable couples whose states don’t recognize their marriages to be recognized by the federal government.

Q: How does it affect taxes?

A: For those same-sex marriages that the federal government does recognize -- and again, the IRS uses a “place of residence” standard, so this could be limited to couples in states where same-sex marriage is legal until the Obama administration takes further action -- joint filing will be available as an option.

But that’s actually probably a bad thing for the couples involved. Same-sex marriages are more likely to be dual-earner, which means they’re likelier to see a marriage penalty. A 2004 Congressional Budget Office report predicted that recognizing same-sex marriage would mildly increase revenue for exactly this reason. This effect is exacerbated both for wealthy couples and for the working poor, as the Earned Income Tax Credit often imposes a big marriage penalty.

The decision is unquestionably a good thing for couples on the estate tax front, as Windsor’s case demonstrates. There’s an unlimited exemption to the tax for money left to spouses, an exemption that covered same-sex couples can now claim.

Q: What about Social Security?

A: This is another area where “place of residence” is the standard, albeit one Obama can change. So no dice if you got married in Iowa and then moved to Nebraska. The spouses of Social Security retirement insurance and disability insurance recipients can receive a benefit worth half their spouse’s benefit but have to forgo benefits of their own if they’re less than the spousal benefit amount.

Surviving spouses can also receive a late spouse’s Social Security benefits if they exceed their own benefits. Additionally, a lump-sum payment of $255 can be paid to surviving spouses under some conditions. Being married also makes it harder to qualify for Supplemental Security Income, a Social Security program for impoverished elderly or disabled people.

The Supreme Court’s decision made all these benefits available to same-sex married couples. What’s more, according to LGBT rights groups, those in civil unions or domestic partnerships (such as those that exist in Oregon or Colorado) are also eligible, because they have the same inheritance rights as married couples.

Q: Let’s say I’m a federal employee with a same-sex spouse. Does this change anything for me?

A: So many things! As Washington Post staff writer Joe Davidson explained last week, “Federal employees living in the 12 states and the District where same-sex marriages are legal would get full spousal benefits immediately if DOMA is overturned.” That means health care, dental, vision -- the works. It’s less clear what it means for those with legal marriages that aren’t recognized in the state where they live. That’ll depend on whether a “state of celebration” or “state of residence” standard is used, and it isn’t clear which one would prevail at first, before the administration’s review takes effect. Additionally, it will be illegal to threaten you, as you’re the spouse of a federal employee.

Q: And if I’m a private employee?

A: In addition to no longer having health benefits taxed, and being eligible for COBRA, you’ll also be guaranteed survivor benefits from your spouse’s pension if the federal government recognizes your marriage. Also, your spouse will be able to take out retirement savings to pay for your medical bills or tuition. However, these benefits are the result of regulations that follow the “place of residence” rule, so your state has to recognize your marriage, too, at least for the time being.

Q: What about if I’m in the military or a veteran?

A: Military spouses get health benefits, housing help and all manner of other support, and because the military recognizes marriages based on where they were performed, same-sex marriages will be recognized similarly. It’s a little trickier for veterans benefits, such as VA health care and GI Bill assistance with higher education costs. If you live in a state that recognizes your marriage, you’re good, and if you lived in such a state at the time of your marriage, you’re good, but if you traveled for the purpose of getting married, you probably won’t get benefits.