After months of delays in the House, yesterday the Illinois General Assembly passed a bill to make Illinois the 15th state to legalize same-sex marriages. The bill goes now to Governor Quinn who has already pledged to sign it into law. The law will go into effect June 1, 2014. For same-sex couples, this law will have far reaching tax implications.
There are of course numerous tax benefits for marriage. Spouses can file their yearly income tax returns jointly, which provides for a lower overall tax burden for many couples. Spouses similarly enjoy unlimited estate and gift exemptions when gifting or bequeathing assets to their spouses.
Currently in Illinois, same sex couples can have civil unions but not a full marriage. The distinction between the two varies with jurisdiction. In Illinois itself, there is little legal difference between a civil union and a marriage. Members of a civil union can file Illinois income tax returns jointly, for example.
It’s a different story with Washington. The federal government does distinguish between a marriage and a civil union. Following the Supreme Court’s ruling in June of this year that overturned portions of the 1993 Defense of Marriage Act (DOMA), the federal government now recognizes marriages between same-sex spouses. The federal government recognizes a same-sex marriage even if the couple in question lives in a state that doesn’t.
It should be noted that the June court ruling only struck down part of DOMA, the section which forbid the federal government from recognizing same-sex marriages, the rest of the act remained in effect. This includes the provision that prevents states from being required to recognize same-sex marriages. If a heterosexual couple marries in Illinois, for example, every other state must recognize that marriage. This is not true, because of the still active parts of DOMA, for same-sex couples, and this could of course have tax consequences.
After June 1, 2014, a same-sex couple will be able to get married in Illinois and enjoy the full state and federal benefits of that marriage. This will have large effects on the tax situations of many of those couples and likewise has reaching implications for their estate plans.
Horowitz Law Offices has helped many people navigate their particular tax situations and controversies and works daily with the Internal Revenue Service, Illinois Department of Revenue and Chicago Finance Department on behalf of our clients. You are welcome to contact us at (312) 787-5533 or firstname.lastname@example.org