Expat Tax Advice for Same-Sex Couples: How Do the New Laws Affect You?

On June 26, 2013 the Supreme Court struck down the Defense of Marriage Act, reversing the law that denied federal benefits to legally married same-sex couples. With this ruling a married same-sex couple has the same federal benefits, such as healthcare and taxes, as opposite sex couples—including those living abroad. If you are a same-sex married couple or are planning on marrying in the future, you may be looking for expat tax advice on how this will affect your US tax return. There are definitive tax implications from this landmark ruling and you need to understand them in order to properly file, and perhaps even amend, your US tax return.

Recently the government announced the answer to a burning question for all same-sex couples: If a couple marries in a state that recognizes same-sex marriage but actually resides in a state that doesn’t, do the federal benefits extend to them? And the answer is YES! A Washington Post article cites that the Treasury Department and its Internal Revenue Service (IRS) have mandated that all legally married same-sex couples be treated as such for the purposes of federal taxation. Although 37 states still don’t recognize gay marriage, the federal government has taken a powerful step in equalizing standards for same-sex couples, no matter what state they call home.

In addition, the Pentagon has announced gay couples in the military will also be afforded these same rights. Military service members who are stationed in a state where same-sex marriage is illegal will be allowed up to 10 days leave in order to travel to one of the states that grant same-sex marriage licenses. The same opportunity will be afforded to military couples stationed outside of the Unites States.

“The Department of Defense remains committed to ensuring that all men and women who serve in the U.S. military, and their families, are treated fairly and equally as the law directs,” the Pentagon said in its announcement.

Can same-sex couples living in a foreign country file together?

Yes. As of 2013, if you have a same-sex spouse whom you legally married in a state or foreign country that recognizes same-sex marriage, you and your spouse generally must use the married-filing jointly or married filing separately filing status on your return, even if you are now residing in a state or foreign country that does not recognize same-sex marriages.

Are there absolute benefits to filing expat taxes jointly with my partner?

Filing married jointly often provides the most beneficial tax break, especially with the Foreign Earned Income Exclusion (FEIE). With FEIE, an individual can deduct $97,600 of earned income from their US tax return, while a married couple filing jointly can deduct $195,200. It’s also important to note that if you file jointly, the likelihood of you reaching the threshold for filing FBAR (Report of Foreign Bank Accounts) increases. If you have any accounts (including your spouse’s accounts) that total $10,000 or more, you need to file FBAR, FinCEN Form 114. It’s important to seek expat tax advice if you are unsure about whether or not you must file FBAR. Failure to file can result in steep penalties.

If you have a qualifying child(ren) you may claim a dependency deduction for the child, as well as deduct some of your dependent care from your taxes.

Should I file amended returns for the years I was legally married to my same-sex spouse?

Maybe. For tax year 2012 and earlier, couples can choose to amend their return using married filing jointly or separately statuses, provided the period of limitations for filing an amended return has not expired. A taxpayer can generally file a claim for a refund for 3 years from the date the return was filed, or 2 years from the date the tax was paid, whichever is later. If you believe that filing jointly during the prior 3 years (assuming you were legally married during those years) would result in a refund, it is absolutely advisable to file amended returns. Remember though if you choose to amend and file jointly, you both must choose to either use the standard deduction or itemize your deductions. This may impact your tax liability/refund so you should consider your options carefully or seek expert expat tax advice before choosing to amend.

Need additional expat tax advice on filing jointly as a same-sex couple?

Our expert CPAs and IRS Enrolled Agents are a superb resource for expat tax questions. In addition to our expat tax return services, including amendments, we also offer consultations to evaluate your specific tax circumstances. Contact us today for our expert expat tax advice!