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What Same-Sex Couples Need To Know About Filing State Taxes

The IRS' recent decision to recognize all legal same-sex marriage for tax filing purposes is changing how many couples will have to file at the state level.

filing taxes

Photo: Philip Taylor (flickr)

Same-sex couples living in states that do not recognize same-sex marriage will still have to file separate state tax returns.

The Internal Revenue Service announced this week it would recognize all legal same-sex marriages for tax filing purposes.

That’s good news for same-sex couples living in states that don’t recognize their marriage because it means they can still get the federal benefits of filing jointly.

But it also makes things a little more complicated on the state level because states such as Indiana that do not allow same-sex marriage don’t accept joint tax returns from same-sex couples who were married in other states.

Here’s what all that means:

  • If you have been legally married in any state, you can file a joint return for your federal taxes.

For tax purposes, the federal government will recognize a same-sex marriage even if the couple is living in a state that does not recognize the marriage.

  • Same-sex couples must still file separately for state taxes.

Depending on what tax service or forms you use, you typically fill out your federal tax return and then use that to fill out your state return. It won’t work if you are filing jointly at the federal level and separately at the state level.

So, Indiana University Maurer School of Law Professor Deborah Widiss says same-sex couples will have to find a work-around.

“You’ll probably have to fill out a pretend return that you can use as the basis for doing that state calculation,” she says.

  • Companies will have to create two separate books for same-sex employees. One for federal taxes and one for state.

During the Supreme Court arguments against the Defense of Marriage Act, more than 200 companies filed a brief explaining the administrative complexity of keeping two entirely separate books for employees who were married to a same-sex partner.

“In that case it had to do with couples who were considered married under state law and not married under federal law,” Widiss says. “Now we have the inversion of that where we’re going to have couples married under federal law and not married under state law. And that’s a headache.”

  • The state will have to create guidelines.

“State taxing agencies are going to have to provide guidance to individuals that are doing this and to companies for their separate bookkeeping. It’s going to be complicated because a lot of state tax code is built on the federal framework,” Widiss says. “It’s going to keep lawyers busy.”

  • The changes will only affect same-sex couples who are married.

same sex couples in Indiana map

Photo: The Williams Insitute

Indianapolis has the highest number of same-sex couples in Indiana with 2,986 couples, followed by Bloomington with 274.

Indiana has about 1,600 same-sex couples that have been married in another state. Another 9,470 same-sex couples are unmarried, according to 2010 Census data.

But Widiss says that since same-sex couples who are married can now access a range of federal rights and benefits, more Indiana couples might choose to go out of state to marry.

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