Revenue Ruling 2013-17: Federal Tax Impact for Spouses

In the 2013 case United States v. Windsor, the Supreme Court struck down Section 3 of the Defense of Marriage Act (DOMA). Before this case, DOMA had defined marriage for all federal purposes as a union between one man and one woman, but the Court found this unconstitutional. In response, the Internal Revenue Service (IRS) issued Revenue Ruling 2013-17 to provide guidance on marital status for federal tax matters. This ruling established a uniform standard for recognizing marriages, impacting how couples interact with the federal tax system.

The “State of Celebration” Rule

Revenue Ruling 2013-17 established a uniform standard known as the “state of celebration” rule. This principle dictates that, for federal tax purposes, the IRS recognizes a marriage if it was legally performed in a jurisdiction that sanctions such unions. This includes marriages conducted in any U.S. state or a foreign country that legally authorizes the marriage. The legal validity of the marriage is determined by the laws of the place where the marriage ceremony occurred.

This approach provides consistency for taxpayers, as their federal marital status does not change if they move to a different state. For instance, a couple legally married in a state that recognizes their union will continue to be treated as married by the federal government, even if they later reside in a state that does not. The Supreme Court’s 2015 decision in Obergefell v. Hodges further simplified the landscape by legalizing same-sex marriage nationwide.

The ruling’s definition is limited to marriage. The IRS stated that formal relationships such as registered domestic partnerships, civil unions, and other similar arrangements are not considered marriages for federal tax purposes. Couples in these legal relationships could not use federal tax provisions applicable to married individuals.

Federal Income Tax Consequences

Following the ruling, legally married couples were required to use either the “Married Filing Jointly” or “Married Filing Separately” filing status for their federal income taxes. They were no longer permitted to file as “Single” or, if applicable, “Head of Household.”

Adopting a married filing status directly impacts the income thresholds for tax brackets, and for many couples, filing jointly resulted in a different marginal tax rate. The standard deduction amount also changed, as the amount for married couples is double the single amount, which could be advantageous.

Eligibility for numerous tax deductions and credits is tied to a taxpayer’s filing status and adjusted gross income (AGI). Many tax benefits, like education credits or IRA deductions, have income limitations that differ between single and married statuses. Consequently, getting married could grant access to certain tax breaks or phase out eligibility for credits previously available.

Retirement Plan and Fringe Benefit Adjustments

The ruling also altered the tax treatment of employer-provided benefits. One of the main changes involved health insurance, where the value of coverage provided to an employee’s same-sex spouse was often treated as taxable income. After the ruling, these benefits could be provided on a pre-tax basis, reducing the employee’s taxable wages.

The guidance also brought changes to qualified retirement plans, such as 401(k)s and pension plans, extending federal spousal rights to all married couples. For example, in plans subject to federal survivor annuity rules, a married participant generally cannot name a non-spouse beneficiary without written, notarized consent from their spouse.

Inheritance rights for retirement accounts were also affected. Upon the death of a married participant, a surviving spouse has unique options, including the ability to roll over the deceased spouse’s retirement funds into their own IRA. This spousal rollover allows the assets to continue growing tax-deferred and bases required minimum distributions on the surviving spouse’s own life expectancy.

Amending Prior Tax Returns

Revenue Ruling 2013-17 provided an opportunity for taxpayers to apply its holdings retroactively, though it was not a requirement. This meant legally married couples could choose to file amended federal income tax returns for prior years that were still open under the statute of limitations. Filing an amended return allowed them to recalculate their tax liability as a married couple, which in many cases resulted in a refund.

The ability to amend was governed by a specific timeframe. Generally, a taxpayer must file a claim for a credit or refund within three years from the date they filed their original tax return or within two years from the date they paid the tax, whichever is later. For taxpayers taking advantage of the ruling in 2013, this meant they could amend returns for tax years 2010, 2011, and 2012.

The process requires filing Form 1040-X, Amended U.S. Individual Income Tax Return. On this form, taxpayers would report their finances as a married couple, changing their filing status from “Single” or “Head of Household.” This allowed them to claim refunds for overpayments, like income tax paid on a spouse’s health benefits.