Gay marriage ruling raises questions on benefits

USATODAY

The Supreme Court decision striking down the Defense of Marriage Act raises a number of questions on who in a same-sex couple is eligible for what federal benefits, ranging from taxes to health care. A person's eligibility for benefits will depend, in some cases, on the state in which the person lives or the agency administering the benefits. Many details won't be known until the Obama Administration -- especially the Internal Revenue Service -- interprets the decision and applies their regulations. USA TODAY's Liz Szabo and Jayne O'Donnell talked to experts to try to answer some common questions.

Q: How will IRS policies change?

A: In a statement Thursday, IRS said it was reviewing the Supreme Court decision and "will move swiftly to provide revised guidance in the near future." While the IRS generally has based its decisions about married couples on the couple's current state of residence, that policy isn't written into law and could be changed, says Brian Moulton, legal director for the Human Rights Campaign, a gay rights organization. So, the IRS could release new policies that would be more friendly to same-sex couples, particularly those living in states that don't recognize same-sex marriage.

Q: Would a same-sex couple who are legally married automatically benefit from being able to file income taxes jointly?

A: No, says certified public accountant Barbara Lipson. As with traditional married couples, the so-called "marriage penalty" would also affect gay couples with higher and relatively equal incomes , says Lipson, who works for McLean, Va. accounting firm, Frank & Company. So filing jointly could cost them. However, if one spouse doesn't work or earn much less than the other, they may benefit by filing jointly, she says.

Q: What about other tax benefits?

A: For couples with large estates, the long-term estate tax benefits of being married could outweigh annual income tax negatives, says Lipson. Also, they can transfer unlimited money to their spouse gift tax-free during the marriage and even during divorce. Another benefit: If a same-sex couple isn't married and lives in a house owned by one partner, the maximum exclusion for the capital gain when they sell the house is $250,000. If the couple is married, they can exclude up to $500,000 of the gain. "That's huge," says Lipson.

Q: How else does the decision affect financial planning for married same-sex couples?

A: If they live in the 13 states plus the District of Columbia that recognize same-sex marriage, "They should be celebrating," says Frank Fantozzi, president of Planned Financial Services in Cleveland."Clearly this is something that helps them out from a planning perspective." For example, legally married gay spouses may elect to leave their pensions or Social Security benefits to their spouse.

Q: Are there tax benefits when it comes to IRA deductions?

A: Yes, for some people, Fantozzi says. Because of the income limitations on making IRA contributions, a stay-at-home same-sex spouse previously wouldn't have been able to take an IRA deduction. Now, however, a legally married gay spouse could take an IRA contribution based on the earned income of their spouse, he says.

Q: What about tax benefits for married couples with children?

A: Previously, same-sex parents who were unable to legally adopt their non-biological children were not eligible to take the dependency exemption or child-related credits, says LIpson. However, now that married same-sex couples can file jointly,Lipson says the non-biological parent can utilize these tax benefits.

Q. Will spouses of federal employees be eligible for benefits, even if they live in states that don't recognize gay marriage?

A. In all likelihood, yes, says Fred Sainz, a spokesman for the Human Rights Campaign. The Office of Personnel Management, which oversees federal workers, is likely to extend benefits in all states, not just the 13 states and the District of Columbia that currently recognize same-sex marriage.

Q. Do all federal agencies use the same standard to determine benefits for married couples?

A. No. Some federal agencies base decisions on the state in which a couple was married, while others consider the couple's current residence, says Moulton. While the IRS currently bases decisions on a person's current address, the Department of Defense bases its decisions on where a married couple lived at the time of the marriage. Some agencies will be able to change their policies, while others agencies' policies are determined by Congress. "The president has said that all legally married couples should be recognized by the federal government," Sainz says. "This is rapidly evolving."

Q. So what happens to military couples who move around a lot?

A. Because military personnel live all over the world, and relocate frequently, the Department of Defense bases its decisions on the place where a couple was married, Moulton says. So if a male soldier marries another man in the District of Columbia, which recognizes the marriage, the military will continue to recognize that marriage, even if the couple moves to a state such as North Carolina, which does not recognize it. After the Supreme Court decision, Secretary of Defense Chuck Hagel said the military will move forward to make benefits, such as health coverage, available to all military spouses.

Q. Does the Department of Veterans Affairs use the same criteria?

A. No. By law, the VA bases its coverage decisions on a person's current address, not where they were married, Moulton says. Congress would have to act to change this. So, it's not clear whether a same-sex spouse would be eligible for benefits if that couple lives in one of the 38 states that don't currently recognize gay marriage.

Q. What about Social Security benefits?

A. Like the VA, the Social Security Administration also bases benefits decisions on a person's current residence, Moulton says. Congress would have to change the law to change that. Social Security benefits for same-sex spouses will vary according to the state in which a person applies for benefits. So a widow who applies for Social Security benefits after her spouse's death in Massachusetts -- where same-sex marriage is legal -- shouldn't have a problem, Sainz says. That same widow would be ineligible, however, if she moves to Florida and then applies for Social Security benefits, because Florida doesn't recognize same-sex marriages.

Q. Will the Supreme Court decision affect private employers and employers with religious objections to same-sex marriage?

A. It could. The Family and Medical Leave Act requires employers with at least 50 employees to let people take up to 90 days of unpaid leave to care for a new baby, family member or spouse, Moulton says. Now, that law will apply to same-sex couples, allowing them to take time to care for spouses without losing their jobs. That will apply to religious employers whose objections to same-sex marriage. In general, the trend has been for more private employers to offer benefits to same-sex couples, Moulton says, partly to recruit the best staff. About 60% of Fortune 500 companies now offer domestic partner benefits, he says.

Q. Will the court's decision affect who can use the Family and Medical Leave Act to care for a baby?

A. No, because the federal government already has extended that benefit to anyone "acting as a parent," even if that person isn't a child's biological or adopted parent, Moulton says. That rule becomes significant in states where gay couples are not allowed to adopt.

Q. Will the court decision affect immigration status?

A. Yes. Americans may now apply for their same-sex spouses to become legal residents, Moulton says. The Department of Homeland Security will recognize same-sex marriages.

Q. Could gay couples lose benefits due to the Supreme Court decision?

A. In some cases. Eligibility for Medicaid, a federal health insurance program managed by individual states, is determined by household income, Moulton says. So, it's possible that some same-sex couples will now make too much money to qualify for Medicaid, after their combined incomes are considered.