The Potential Federal Tax Implications of
United States v. Windsor (Striking Section 3 of
the Defense of Marriage Act (DOMA)):
Selected Issues
Margot L. Crandall-Hollick
Analyst in Public Finance
Molly F. Sherlock
Specialist in Public Finance
Carol A. Pettit
Legislative Attorney
September 9, 2013
Congressional Research Service
7-5700
www.crs.gov
R43157
CRS Report for Congress
Pr
epared for Members and Committees of Congress
Potential Federal Tax Implications of U.S. v. Windsor: Selected Issues
Contents
Scope of the Report ......................................................................................................................... 1
United States v. Windsor .................................................................................................................. 1
Same-Sex Marriage Recognition and the Internal Revenue Code (IRC) ........................................ 1
Tax Issues ......................................................................................................................................... 2
Estate Tax .................................................................................................................................. 3
Income Tax ................................................................................................................................ 4
Tax Filing Status and Tax Brackets ..................................................................................... 4
Other Selected Income Tax Issues ....................................................................................... 7
Potential Income Tax Consequences of the Windsor Decision ........................................... 9
Amending Tax Returns .................................................................................................................. 10
Tables
Table 1. Example of Marriage Penalties and Bonuses Among Same-Sex Couples ......................... 5
Contacts
Author Contact Information........................................................................................................... 11
Congressional Research Service
Potential Federal Tax Implications of U.S. v. Windsor: Selected Issues
Scope of the Report
This report will provide an overview of the potential federal tax implications for same-sex
married couples of the U.S. Supreme Court ruling in United States v. Windsor, with a focus on the
federal income tax.1 Estate tax issues are also discussed.2 Importantly, this report focuses on
changes in the interpretation and administration of federal tax law resulting from the Court’s
decision. The decision itself did not amend federal tax law. This report is not intended to address
all tax-related issues that may arise as a result of the Windsor decision. Such discussion is beyond
the scope of this report.
United States v. Windsor
On June 26, 2013, the U.S. Supreme Court held that Section 33 of the Defense of Marriage Act
(DOMA)4 is unconstitutional. Section 3 requires that, for purposes of federal enactments,
marriage is limited to the union of one man and one woman and the word spouse is defined as
someone of the opposite-sex who is a husband or wife.5 Hence, prior to the Windsor decision,
same-sex marriages were not recognized by the federal government for the receipt of federal
benefits or for federal tax purposes. The Government Accountability Office (GAO) estimated in
2004 (the most recent estimates available) that there were 1,138 statutory provisions in the U.S.
Code in which marital status was a factor in determining benefits.6 Of these, almost 200 were
statutory provisions of the Internal Revenue Code (IRC).7
Same-Sex Marriage Recognition and the Internal
Revenue Code (IRC)
On August 29, 2013, the Department of the Treasury and Internal Revenue Service (IRS) ruled
that all legal same-sex marriages will be recognized for federal tax purposes.8 The ruling applies
regardless of whether the couple resides in a state or jurisdiction that recognizes same-sex
1 United States v. Windsor, 570 U.S. ____; 133 S. Ct. 2675 (2013). No. 12-307, slip op. available at
http://www.supremecourt.gov/opinions/12pdf/12-307_6j37.pdf.
2 Although the estate tax was the motivating issue in the Windsor decision, as discussed later in this report, few married
same-sex couples will be affected by changes in the administration of the estate tax.
3 1 U.S.C. § 7.
4 P.L. 104-199.
5 According to Section 3 of the Defense of Marriage Act (DOMA), “In determining the meaning of any Act of
Congress, or of any ruling, regulation, or interpretation of the various administrative bureaus and agencies of the United
States, the word ‘marriage’ means only a legal union between one man and one woman as husband and wife, and the
word ‘spouse’ refers only to a person of the opposite-sex who is a husband or a wife.’’ 1 U.S.C. §7.
6 U.S. General Accounting Office, Defense of Marriage Act: Update to Prior Report, GAO-04-353R, January 23, 2004.
7 Using tables provided by GAO, CRS found that in 2004, there were 198 sections of the Internal Revenue Code (IRC)
in which marital status was a factor. See Appendix 1 and Appendix 2 in GAO-04-353R and Enclosure II in U.S.
General Accounting Office, Defense of Marriage Act, OGC-97-16, January 31, 1997.
8 See Rev. Rul 2013-17. Available at http://www.irs.gov/pub/irs-drop/rr-13-17.pdf. There is a possibility that some
provisions in the U.S. Code or the respective regulations implementing them may need modification of wording so that
they can apply to married same-sex couples.
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Potential Federal Tax Implications of U.S. v. Windsor: Selected Issues
marriage.9, Thus, for federal tax purposes, same-sex couples who were legally married in one
state, but reside in a state that does not recognize the marriage, will be treated as married.10 The
ruling does not apply to civil unions, registered domestic partnerships, or other formal
relationships not denominated as a marriage under state law.11
Among same-sex couples who identify as married, more than half (56% or approximately 94,000
couples) reside in states that do not recognize same-sex marriage.12 While the August 29, 2013,
ruling provides certainty regarding federal tax filing status for these couples, the ruling may
complicate tax filing at the state level. There are 24 states that do not recognize same-sex
marriage but do require taxpayers to reference federal tax returns in the process of preparing state
tax returns.13
Tax Issues
With respect to federal tax-related issues, the ruling on Section 3 of DOMA will primarily affect
married same-sex couples’ federal income taxes. For the limited number of married same-sex
individuals who have sufficient assets to be subject to the estate tax, potential estate tax liability
may also be affected. Treating same-sex couples as married for federal tax purposes could have
9 Similarly, guidance from the Office of Personnel Management indicates that, for purposes of eligibility for specific
federal employee benefits, legal same-sex marriages will be recognized “regardless of an employee’s or annuitant’s
state of residency.” OPM, Benefits Administration Letter, No. 13-203 (Jul. 17, 2013). Available at
http://www.opm.gov/retirement-services/publications-forms/benefits-administration-letters/2013/13-203.pdf. As of
June 2013, 13 states (California, Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, Minnesota, New
Hampshire, New York, Rhode Island, Vermont, and Washington), and the District of Columbia recognized same-sex
marriages. Additionally, some counties in New Mexico and one in Pennsylvania have been issuing marriage licenses to
same sex couples. Some of the counties in New Mexico are doing so pursuant to court order, while in at least one other
county, the county clerk began issuing marriage licenses without court order. Associated Press, “New Mexico judge
upholds county same-sex marriage ruling, orders issuing of licenses,” Washington Post, September 4, 2013. Available
at http://www.washingtonpost.com/national/new-mexico-judge-upholds-county-same-sex-marriage-ruling-orders-
issuing-of-licenses/2013/09/04/bc6dc7a2-158a-11e3-961c-f22d3aaf19ab_story.html. In Pennsylvania, the Montgomery
County clerk began issuing the licenses despite state law to the contrary. The Pennsylvania Health Department filed a
case against the clerk. The judge hearing the case has indicated that he will rule quickly. Miranda Leitsinger, Pa. judge
hears arguments in landmark gay marriage case, Sept. 4, 2013, NBC News. Available at http://usnews.nbcnews.com/
_news/2013/09/04/20311916-pa-judge-hears-arguments-in-landmark-gay-marriage-case?lite&preview=true.
10 This ruling clarifies previous uncertainty, where it was unclear if recognition of same-sex marriage for federal tax
purposes would depend on recognition of same-sex marriage in a couple’s state of residence. The Court in the Windsor
decision wrote, “The federal statute is invalid, for no legitimate purpose overcomes the purpose and effect to disparage
and to injure those whom the State, by its marriage laws, sought to protect in personhood and dignity. By seeking to
displace this protection and treating those people as living in marriages less respected than others, the federal law is in
violation of the Fifth Amendment. This opinion and its holding are confined to those lawful marriages.” U.S. v.
Windsor, 570 U.S. ____ ; 133 S.Ct. at 2696. No. 12-307, slip op. at 25-26 available at http://www.supremecourt.gov/
opinions/12pdf/12-307_6j37.pdf.
11 It is important to note that a civil union is a legal protection conferred at the state, not the federal, level. As such a
variety of benefits discussed in this report may not apply to civil unions.
12 This calculation is based on the 2011 American Community Survey (ACS)—the most recent data available—which
asks respondents their sex as well as the sex of their partner. The respondent can identify a potential partner as a
husband, wife, or an unmarried partner—although the question does not require the respondent to specify whether the
partner is legally recognized as a spouse. For more information, see American Community Survey,
http://www.census.gov/acs/www/about_the_survey/forms_and_instructions/. For ACS data see http://www.census.gov/
hhes/samesex/data/acs.html.
13 See Lydia Beyoud, “Legal Same-Sex Marriage Recognized for Federal Tax Purposes, IRS, Treasury Says,”
Bloomberg BNA Daily Tax Report, Aug. 30, 2013.
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Potential Federal Tax Implications of U.S. v. Windsor: Selected Issues
substantial financial implications for some affected couples. The budgetary impact from the
perspective of the federal government, however, is likely small.14 Currently, the U.S. Census
Bureau estimates that there are 605,472 same-sex couples in the United States (less than one-half
of one percent of all tax returns filed), of which approximately 168,000 (27.8%) self-identify as
married.15 It is not known whether all who self-identified as married were legally married in a
jurisdiction recognizing same-sex marriage.16
Estate Tax
The unlimited marital deduction under the estate tax was at issue in Windsor.17 Under current law,
a deceased spouse’s estate can transfer all of assets to the surviving spouse without incurring any
estate tax.18 Prior to the decision in Windsor, a married same-sex couple was not eligible for this
spousal tax exemption. (The exemption amount is the amount of the estate which, when
bequeathed to an heir, is tax-free. If the heir is a spouse, the exemption amount is unlimited.)
Thus, for some couples, the Windsor decision could result in a reduced estate tax liability.19
In addition to being eligible for unlimited spousal transfers, same-sex couples may also benefit
from transferability of exemption amounts to non-spouse beneficiaries. Unlike the unlimited
spousal exemption, there is a limit on the amount of an estate which can pass to a non-spouse heir
tax-free. As enacted, the estate tax is structured so that the first $5 million per individual or $10
million per federally recognized married couple (adjusted for inflation) of the estate and inter-
vivos gifts (gifts made prior to death) are exempt from federal taxes when bequeathed to non-
spouse beneficiaries, like children or non-relatives.20
In 2013, once adjusted for inflation, the exemption amount per individual is $5.25 million. Since
any unused exemption amounts are transferable between spouses, if one spouse leaves an estate
of $3 million upon death in 2013 to a non-spouse beneficiary, the remaining $2.25 of that
deceased spouse’s exemption amount would be transferred to the surviving spouse.21 Hence, the
surviving spouse’s exemption amount would increase from $5.25 million (or, the amount of the
exemption in the year the second spouse dies) to $7.5 million. Prior to the Windsor decision, the
surviving same-sex spouse could only use his or her own exemption amount to make a tax-free
14 Lydia Beyoud, “Domestic Partners: Practitioners Say Major Guidance Needed from Federal Agencies for Same-Sex
Couples,” BNA Daily Tax Report, July 1, 2013.
15 From the ACS, supra footnote 12. These data are reported as the percentage of same-sex households where the
partners are reported as spouses. It does not necessarily reflect those spouses who are legally married. For ACS data see
http://www.census.gov/hhes/samesex/data/acs.html.
16 Partners in same-sex couples may consider themselves “spouses” even if they are not legally married if, for example,
they are in a civil union or a domestic partnership. Hence these statistics should not be interpreted as the number of
same-sex couples who are legally married.
17 When Edith Windsor’s wife died, her wife’s estate was obligated to pay approximately $363,000 in federal estate
taxes. Had Edith Windsor been married to a man, she would have qualified for the spousal exemption and the estate
would not have been taxed at the time of her spouse’s death.
18 For an overview of the estate tax, see CRS Report R42959, The Estate and Gift Tax Provisions of the American
Taxpayer Relief Act of 2012, by Jane G. Gravelle.
19 Recognition of same-sex marriages for the purposes of the federal estate tax can only result in a reduction in estate
taxes: “marriage tax bonuses.”
20 This exemption amount is adjusted annually for inflation.
21 An estate tax return must be timely filed to affect this transfer even if the estate would not otherwise be required to
file a return.
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Potential Federal Tax Implications of U.S. v. Windsor: Selected Issues
bequest to a non-spouse beneficiary ($5.25 million in 2013). Hence, the surviving spouse of a
same-sex marriage may, as a result of the Windsor decision, be able to bequeath a greater amount
tax-free to a non-spouse beneficiary.
While the estate tax may have been at issue in Windsor, most married same-sex couples will not
be affected because most people generally are not subject to the estate tax. In 2012, roughly 3,600
estates, representing less than 0.2% of all deaths in 2012, are subject to the estate tax.22 Given that
so few estates are subject to the estate tax, and that the estate tax is a small portion of overall
federal tax revenues,23 the federal budgetary impact of recognizing same-sex marriages for estate
tax purposes is small.24
Income Tax
The Windsor decision could affect married same-sex couples’ federal income taxes in a variety of
ways. All taxpayers in federally recognized same-sex marriages will be required to file as married
on any return filed after September 15, 2013,25 which may affect their marginal tax rates.26 Other
tax effects of the decision may include changes in eligibility for a variety of tax credits, as well as
changes in the tax treatment of certain forms of employee compensation. These changes will, in
many cases, change married same-sex couples’ tax liabilities, as discussed below. There are other
changes not discussed which are beyond the scope of this report.
Tax Filing Status and Tax Brackets
Before Windsor, married same-sex couples were generally considered single for federal income
tax purposes. In cases where the couple had children, one partner would claim any children as
dependents and file federal income taxes using the head of household status. The other spouse
would file as single.
As a result of the ruling on Section 3 of DOMA, same-sex couples who are recognized as married
under the IRC will be required to file their taxes in the same manner as married opposite-sex
couples—generally either jointly (“married filing jointly”) or separately (“married filing
separately”). However, very few married taxpayers file separately (less than 5% of married
taxpayers in 2010)27 because it generally results in higher tax liabilities than if income taxes are
22 See Tax Policy Center analysis of 2013 Budget Proposals, available at http://www.taxpolicycenter.org/taxtopics/
2013-Restore-the-Estate-Gift-and-Generation-Skipping-Transfer-Tax.cfm.
23 In 2012, 1.2% of total federal revenue was collected through the estate tax.
24 This was the conclusion reached in a 2004 Congressional Budget Office (CBO) report. CBO also noted that same-
sex spouses may be more likely than opposite-sex spouses to make charitable bequests from their estates, although no
specific evidence was given in support of this claim. See Congressional Budget Office, The Potential Budgetary Impact
of Recognizing Same-Sex Marriages, Washington, DC, June 21, 2004, http://www.cbo.gov/publication/15740.
25 September 16, 2013, is the effective date of Rev. Rul. 2013-17.
26 26 U.S.C. §§1(a), (d); 6013; 7703.
27 In 2010, 56.1 million married taxpayers filed income tax returns, of which 2.5 million were filed as married filing
separately. See the IRS Statistics of Information (SOI), Table 1.2, http://www.irs.gov/uac/SOI-Tax-Stats—Individual-
Statistical-Tables-by-Size-of-Adjusted-Gross-Income.
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Potential Federal Tax Implications of U.S. v. Windsor: Selected Issues
filed jointly.28 Hence, the remainder of this report will generally describe situations where married
same-sex couples, as a result of the Windsor decision, will file their returns jointly.
For some same-sex couples, filing status changes resulting from the Windsor decision may result
in increased or decreased income tax liabilities. Some married same-sex couples may face a
“marriage penalty,” having a higher tax liability when filing taxes as a married couple than their
combined tax liability when filing as two single taxpayers. Other married same-sex couples may
benefit from a “marriage bonus,” whereby they have a lower tax liability when filing as a couple
than their combined tax liability when filing individually.
Various circumstances may make it more or less likely that couples incur a marriage penalty or a
marriage bonus when filing their income taxes.29 Marriage penalties are more likely among
couples where both partners earn similar incomes. Couples with a greater disparity in earnings are
more likely to experience a marriage bonus. Most couples in which one spouse earns less than 5%
(or none) of the family’s total income will experience a marriage bonus.30
Marriage tax penalties and bonuses are consequences of a progressive tax system, whereby higher
ranges of income are subject to higher tax rates. Tax brackets refer to the range of income subject
to a particular tax rate. For example, under current law, the first $17,850 of taxable income for all
married joint filers is subject to a 10% tax rate (the “10% bracket”). Taxable income above
$17,850 but less than $72,500 is taxed at a 15% rate (the “15% bracket”). All tax brackets for
2013 for single and married joint filers are given in the text box on the following page.
Table 1 provides an illustrative example of how the distribution of a combined income of
$200,000 between partners can result in a marriage bonus or penalty. A couple where both
partners earn $100,000, having a combined income of $200,000, would experience a marriage tax
penalty of $879. A couple where one partner earns $50,000 and the other $150,000, also having a
combined income of $200,000, would have a marriage tax bonus of $557.
Table 1. Example of Marriage Penalties and Bonuses Among Same-Sex Couples
Combined Tax Liability
Ordinary Income Split
Unmarried
Married
Change in Tax
between Partners
Partners
Partners
Liability
Partner A: $50,000
Partner B: $150,000
$38,422 $37,866 $557
(bonus)
Partner A: $100,000
Partner B: $100,000
$36,987 $37,866 -$879
(penalty)
28 Filing separately tends to be least advantageous to married couples, since they are denied a variety of tax benefits or
receive smaller benefits. See Leslie A. Whittington and Updated by James Alm, “Marriage Penalty,” in The
Encyclopedia of Taxation and Tax Policy, ed. Joseph J. Cordes, Robert D. Ebel and Jane G. Gravelle, 2nd ed.
(Washington, D.C.: The Urban Institute Press, 2005), p. 252.
29 For evidence on the tax consequences of marriage for cohabiting couples, see Emily Y. Lin and Patricia K. Tong,
“Marriage and Taxes: What Can We Learn from Tax Returns Filed by Cohabiting Couples?” National Tax Journal,
vol. 65, no. 4 (December 2012), pp. 807-826.
30 Ibid., p. 818. Using 2007 data, it was found that only 3% of cohabiting couples where one spouse earned less than
5% of combined income prior to marriage experienced a marriage tax penalty, 21% saw no change in tax liability, and
77% had a marriage bonus.
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Potential Federal Tax Implications of U.S. v. Windsor: Selected Issues
Source: 2013 Data from the Tax Policy Center. See http://taxpolicycenter.org/taxfacts/
marriagepenaltycalculator.cfm.
In the example in Table 1, when each taxpayer earning $100,000 was taxed as a single individual,
each had earnings that put them in the lower end of the 28% tax bracket.31 Thus, most of their
income falls into the 25% bracket or below. A feature of the U.S. income tax system is that the
25% tax bracket for married filing jointly is less than twice as large as the 25% bracket for
singles. Thus, when treated as a married couple, a greater proportion of the couples’ combined
income falls into the higher 28% tax bracket. The marriage tax penalty results from a greater
proportion of the couples’ combined income being taxed at the 28% rate.
The 2001 and 2003 tax cuts (which
Tax Brackets for Single Filers and
were extended permanently for most
Married Joint Filers, 201332
taxpayers by the American Taxpayer
Relief Act of 2012 (P.L. 112-240))
Married Filing
Single
Jointly
reduced or eliminated marriage
Bracket
penalties for many middle-income
(tax
Taxable Income
Taxable Income
taxpayers.33 One way these laws
rate)
(over-but not over)
(over-but not over)
reduced penalties was by making
10%
$0-$8,925
$0-$17,850
certain tax brackets for married joint
15%
$8,925-$36,250
$17,850-$72,500
filers twice as large as the equivalent
bracket for single filers.34 Specifically,
25%
$36,250-$87,850
$72,500-$146,400
the 2001 and 2003 tax cuts increased
28%
$87,850-$183,250
$146,400-$223,050
the size of 10% and 15% tax brackets
33%
$183,250-$398,350
$223,050-$398,350
for married taxpayers filing jointly such
that brackets for married filing jointly
35%
$398,350-$400,000
$398,350-$450,000
became twice the size of single
39.6%
$400,000-
$450,000-
brackets.35 Hence, if two single
individuals in the 10% or 15% bracket marry, their combined income would either still be in the
15% bracket (marriage would be tax-neutral) or in the 10% bracket (a marriage bonus since a
portion of their income would be taxed at a lower rate, 10% versus 15%).
As an example, take a single taxpayer with taxable income of $1,000. This taxpayer would be in
the 10% bracket. Suppose this taxpayer marries an individual with taxable earnings of $10,000,
putting them in the 15% bracket for individuals. With a combined income of $11,000, this couple
would be in the 10% bracket when married filing jointly. With no income being taxed at the 15%
rate, this couple would experience a marriage tax bonus. Dual-worker couples with income above
the 15% bracket threshold could face a penalty because higher tax brackets for joint filers are less
31 For 2013 statutory marginal tax rates and tax brackets, see CRS Report RL32808, Overview of the Federal Tax
System, by Molly F. Sherlock and Donald J. Marples.
32 See IRS Revenue Procedure 2013-15, http://www.irs.gov/pub/irs-drop/rp-13-15.pdf .
33 For more information on all the provisions of the Bush-era tax cuts, including marriage penalty relief, see Table 1 in
CRS Report R42894, An Overview of the Tax Provisions in the American Taxpayer Relief Act of 2012 , by Margot L.
Crandall-Hollick.
34 A tax bracket is a range of income that is subject to a specific tax rate. (For example, if hypothetically income
between $10,000 and $20,000 was subject to a 7% tax rate, that range of income would be called the 7% tax bracket.)
35 The 2001 and 2003 tax cuts made the standard deduction for married couples twice as large as the standard deduction
for individuals and coordinated phase-out thresholds for certain tax benefits. These provisions were made permanent by
P.L. 112-240.
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than twice as wide as those for single filers. Ultimately for those taxpayers with income above the
15% bracket ($36,250 for singles and $72,500 for joint filers in 2013), the distribution of income
between both spouses and the presence or absence of children will determine whether marriage
results in a penalty or bonus.
Marriage penalties may be more likely for couples with children for several reasons. Many
involve tax credits, which are discussed below. However, another reason involves the changes in
filing status and resulting changes in tax brackets. Prior to the Windsor decision, married same-
sex couples with children could not file a federal tax return as a married couple. Instead, one
partner would file as a head of household, claiming the children as a dependents. The other would
file as single. As a result of the Windsor decision, couples with children whose marriage is
federally recognized will be required to file as married. Although allowed to file joint returns,
they may find that they will be in a higher tax bracket than they were when they filed as head of
household and single. Since tax brackets above the 15% bracket for married couples filing jointly
are less than the combined equivalent levels if one of the taxpayers were filing as head of
household and the other as single, married same-sex couples may be subject to a marriage penalty
depending on the distribution of earnings between the spouses.
Other Selected Income Tax Issues
As a result of the Windsor decision, other aspects of married same-sex couples’ income taxes may
change, including the amount of or eligibility for credits and the tax treatment of certain forms of
employee compensation.
Income Tax Credits
After the Windsor decision, the tax liabilities of same-sex couples with children may change since
marriage, as recognized for federal tax purposes, can affect the amount of certain tax credits,
especially those that benefit taxpayers with children. Generally, tax credits are structured such
that the amount of the credit falls when income exceeds a certain threshold, ultimately phasing
out to zero. When marriage results in a combined income that is in a credit’s phase-out range (or
is so high the taxpayers are ineligible for the credit), the credit amount may be reduced resulting
in increased tax liability. Some of the credits that are subject to income limitations are described
below:
• The Earned Income Tax Credit (EITC): The value of the earned income
tax credit (EITC) is reduced for many low-income dual earner couples when
they are married. Marriage penalties occur when the joint income of the
married couple pushes them into the EITC phase-out range or results in the
couple being ineligible for the credit.36
• The Child and Dependent Care Credit: The amount of the child and
dependent care credit is limited to no more than the income of the lower
36 In 2013, a childless taxpayer can receive a maximum credit of $487, while the maximum values of the credit for
taxpayers with children are $3,250 for a taxpayer with one child, $5,372 for a taxpayer with two children, and $6,044
for a taxpayer with three or more children. These levels are adjusted annually for inflation. For more information, see
CRS Report RL31768, The Earned Income Tax Credit (EITC): An Overview, by Christine Scott. It is possible that low-
income couples with children could have a marriage tax bonus if they were in the phase-in range for the EITC.
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Potential Federal Tax Implications of U.S. v. Windsor: Selected Issues
earning spouse. If one spouse has no income, the couple generally would not
qualify for the credit.
• The Child Tax Credit: The value of the child tax credit phases out as a
taxpayer’s income rises above a certain income level.37 The phase-out
threshold for married couples is less than twice that for unmarried
individuals. As a result, two unmarried individuals might each qualify for the
credit but receive a smaller credit or become ineligible for it if married.
• Education Tax Credits: The income levels at which taxpayers are ineligible
for education tax credits tend to be twice as high for married couples as for
singles. The ultimate value of the credit as a result of marriage will depend
on the distribution of income among spouses. Marriage is unlikely to affect
the overall credit amount among couples whose income is equally distributed
between the two partners. However, among couples whose income is less
evenly distributed, the value of their education credit will depend on the
income level of the individuals who incur education expenses, and could
increase or decrease as a result of marriage depending on the taxpayers’
particular circumstances.
• Adoption Credit: The Windsor decision also has implications for same-sex
couples claiming the adoption tax credit. The adoption credit is generally not
allowed when adopting a spouse’s child.38 Therefore, the Windsor decision
may mean that some same-sex partners who might otherwise have been able
to claim an adoption credit will no longer be able to do so.
Non-Taxable Employee Compensation
The Windsor decision will affect whether certain forms of employee compensation are
nontaxable, including contributions to dependent care flexible spending accounts (DCFSA) and
the employer contributions for employer-provided health insurance plans.
Under current law, taxpayers with children may contribute up to $5,000 to a DCFSA. The total
amount of contributions that are tax exempt for any tax return is $5,000 without regard to the
number of children or the number of parents. Hence, a married couple can put a maximum of
$5,000 in a DCFSA, the same maximum amount an individual can put in these accounts.
Therefore, any amount in excess of $5,000 would be included in taxable income for the married
couple. Same-sex married couples who each have contributed to a DCFSA may find that part of
their account becomes taxable even though their individual incomes make them eligible for the
child and dependent care credit. If each partner had a child and each was contributing to a
DCFSA, they may have over-contributed in the first year in which they file as a married couple.
In subsequent years, they would be limited to putting $5,000 in the DCFSA, though they could
divide that amount between themselves.39
37 Currently, the phase-out threshold is $110,000 for couples filing jointly and $75,000 for unmarried individuals.
38 For general background on the adoption tax credit, see CRS Report RL33633, Tax Benefits for Families: Adoption,
by Christine Scott.
39 Filing separate returns would be the least beneficial because no child care expenses are recognized for married
people who file separately.
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In contrast to the effect on DCFSA, the Windsor decision will provide tax benefits to married
same-sex couples who are covered by an employer-sponsored health insurance plan. When an
employee elects to purchase employer-provided health insurance, the employer generally pays for
part of the premium. The employer’s contribution to an individual or family plan generally is not
considered taxable income to the employee. However, before the Windsor decision, same-sex
employees who purchased an employer-sponsored family health plan were taxed on the estimated
value of the employer’s contribution toward the premiums for the same-sex spouse. Opposite-sex
couples are not taxed on the portion of health insurance premiums the employer pays for the
opposite-sex spouse. After Windsor, the estimated value of the employer’s contribution to health-
insurance coverage for an employee’s same-sex spouse will be nontaxable, reducing tax liability.
Potential Income Tax Consequences of the Windsor Decision
Research quantifying the income tax consequences of marriage for opposite-sex couples may be
useful for understanding the potential tax consequences of marriage for same-sex couples.
Applying the 2007 tax code to cohabiting couples, Lin and Tong (2012) found that roughly half of
couples who marry would have a marriage tax penalty.40 Most of the remaining couples (38%)
were estimated to have marriage tax bonuses. On average, marriage resulted in an increase in tax
liability of $450 per couple. However, since certain research indicates that the demographic
characteristics of opposite-sex couples differ from those of same-sex couples (e.g., within-couple
distribution of earnings, number of children), marriage tax consequences amongst the population
of same-sex couples may not follow the same patterns as found for opposite-sex couples.41
As discussed earlier in this report, if same-sex couples tend to have two income earners with
similar incomes, these couples are likely to face marriage tax penalties, especially if their
combined income were to push them above the 15% tax bracket. On the other hand, same-sex
couples who marry are less likely to have children than opposite-sex couples which would lead to
more marriage tax bonuses, particularly for lower-income couples.42 On balance, as indicated by
the estimates that suggest same-sex marriage will result in additional federal revenues,43 the value
of marriage tax penalties is expected to exceed the total value of marriage tax bonuses for same-
sex couples.44 Reportedly, the Treasury has noted that data on the proportion of married same-sex
couples who would face marriage tax penalties or bonuses is lacking.45
Recognizing same-sex marriages for federal income tax purposes would likely result in additional
federal income tax revenues, although available estimates suggest the budgetary impact would be
40 Emily Y. Lin and Patricia K. Tong, “Marriage and Taxes: What Can We Learn from Tax Returns Filed by
Cohabiting Couples?” National Tax Journal, vol. 65, no. 4 (December 2012), pp. 807-826.
41 Differences in demographic characteristics between same-sex and opposite-sex couples are noted in Adam
Stevenson, “The Labor Supply and Tax Revenue Consequences of Federal Same-Sex Marriage Legalization,” National
Tax Journal, vol. 65, no. 4 (December 2012), pp. 783-806.
42 Stevenson, supra note 40.
43 Congressional Budget Office, The Potential Budgetary Impact of Recognizing Same-Sex Marriages, Washington,
DC, June 21, 2004, http://www.cbo.gov/publication/15740 and Stevenson, supra note 40.
44 Over time, as a result of the Windsor decision regarding same-sex marriage, the social and economic characteristics
of same-sex couples who legally marry may change. For example, more married same-sex couples may choose to have
or adopt children. Or one spouse may choose to leave the workforce. Such changes could have an impact on the federal
income tax liability of the couple.
45 Beyoud, supra footnote 13.
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Potential Federal Tax Implications of U.S. v. Windsor: Selected Issues
small. In 2004, the Congressional Budget Office (CBO) estimated that recognition of same-sex
marriages would increase federal income tax revenues by $200 million to $400 million per year
between 2005 and 2010.46 Others contend that the revenue gains would be smaller than CBO’s
estimates, somewhere in the $20 million to $40 million range annually.47 Relative to the
magnitude of total individual income tax revenues—$1.1 trillion in 2012—the revenues that
might be raised by recognizing same-sex marriages for federal tax purposes represent less than
one-tenth of one percent of income tax revenues.48
Amending Tax Returns
Before Windsor, all same-sex married couples were required to file their federal income tax
returns as unmarried individuals. The August 29, 2013, Treasury and IRS ruling made clear that
taxpayers who were in same-sex marriages for one or more open prior tax years may file
amended returns to change their filing status to that of a married couple. For most taxpayers, this
means that amended returns can be filed for tax years 2010, 2011, and 2012.49 Filing amended
returns is an option, but not a requirement. Thus, taxpayers may choose to file an amended return
if doing so will result in a refund. Taxpayers may choose to file amended returns to exclude from
income certain fringe benefits, such as health insurance coverage, provided to a same-sex
spouse.50 Taxpayers in legal same-sex marriages who want to amend prior year’s tax returns for
reasons other than changing their filing status should proceed with caution since it is unclear
whether they would be required to change their filing status if amending the return after
September 16, 2013.51 If such a change were required, it might negate any benefit they would
otherwise derive from amending the return depending upon the facts and circumstances involved
in their (and their spouses’) returns.
The unlimited marital deduction under the estate tax was at issue in Windsor. The Court
determined that the estate was allowed to transfer all assets to Ms. Windsor, the surviving spouse,
without incurring estate taxes. Surviving spouses of same-sex marriages may choose to file an
46 Congressional Budget Office, The Potential Budgetary Impact of Recognizing Same-Sex Marriages, Washington,
DC, June 21, 2004, http://www.cbo.gov/publication/15740.
47 Stevenson, supra note 40.
48 Others have also noted that while recognizing same-sex marriages for federal tax purposes will likely result in
additional federal revenues, the effect is expected to be small. See Diana Furchtgott-Roth, “Same-Sex Marriage
Decisions Won't Affect Uncle Sam’s Bottom Line,” Tax Notes, July 1, 2013, pp. 75-77.
49 Generally, taxpayers may file amended returns within the three years after the filing date of the return or two years
after the tax was paid, whichever is later. These are considered “open years.” However, there may be other
considerations in determining whether to amend a prior year’s return. One might be whether one wants to extend the
time in which the return can be examined.
50 Where health insurance for a same-sex spouse was included in income, the taxpayer may be able to recover excess
Social Security and Medicare paid based on the income recognized for the same-sex insurance coverage. Employers
will be able to file Form 941-X to claim refunds or adjustments for overpayment of both the employer’s and
employee’s portions of Social Security and Medicare tax. The IRS is expected to provide guidance soon regarding
procedures to be followed. Answers to Frequently Asked Questions for Individuals of the Same Sex Who Are Married
Under State Law, Q. 12, Internal Revenue Service. Available at http://www.irs.gov/uac/Answers-to-Frequently-Asked-
Questions-for-Same-Sex-Married-Couples.
51 IRS guidance addresses the effect of Windsor on original returns filed after September 15, 2013, as well as the option
for amending to change the filing status on a return to MFJ or MFS, but does not address whether an amended return
filed after September 15, 2013 must be filed using a married filing status. Id. Q. 2.
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Potential Federal Tax Implications of U.S. v. Windsor: Selected Issues
amended estate tax return for open years if the decedent’s estate was subject to estate taxes as a
result of not using the unlimited marital deduction.
Author Contact Information
Margot L. Crandall-Hollick
Carol A. Pettit
Analyst in Public Finance
Legislative Attorney
mcrandallhollick@crs.loc.gov, 7-7582
cpettit@crs.loc.gov, 7-9496
Molly F. Sherlock
Specialist in Public Finance
msherlock@crs.loc.gov, 7-7797
Congressional Research Service
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