September 17, 2013
Stop on Same-Sex Marriage Licenses in PA Highlights Tax Mess for Legally Married Same-Sex Couples
New York City, NY — Last Thursday’s court action halting the granting of marriage licenses to same-sex couples in Montgomery County, PA, underscores a complex and potentially expensive tax scenario for legally married same-sex couples in states where same-sex marriage is not recognized, according to David H. Glusman, CPA, Partner-in-Charge of the Philadelphia office of Marcum LLP and a member of the Firm’s national Lesbian, Gay, Bisexual & Transgender Practice group. Marcum was the first national accounting and advisory firm to establish a tax and estate planning practice dedicated to the LGBT community.
"Because Pennsylvania does not recognize same-sex marriage, same-sex couples legally married in other jurisdictions but residing in Pennsylvania face a time-consuming, potentially expensive and complex challenge in filing their state and federal tax returns," Mr. Glusman said. "Since the IRS now recognizes all legal same-sex marriages for federal tax purposes, such couples in Pennsylvania and other states where same-sex marriage is not legal will need to file federal and state tax returns using different calculations. That means double the effort, greater cost and lots of issues to be sorted through – especially since the do-it-yourself tax programs have not yet caught up with all this."
For example, a married same-sex couple in Pennsylvania cannot take advantage of the tax free transfer of property between spouses. A same-sex spouse who owns a home cannot transfer the home to joint ownership without paying the Pennsylvania real estate transfer tax. A heterosexual married couple would be able to make the transfer tax free. Likewise, if one spouse dies and leaves an estate to his or her same-sex spouse, the surviving spouse will pay the maximum Pennsylvania estate tax rate – currently 15% - while the heterosexual married couple can transfer assets at death tax free.
"It is extremely important for same-sex married couples to understand their options under various tax alternatives, so that any potential risk can be mitigated. Deductions may receive different treatment for married vs. single filers for state tax purposes," Mr. Glusman advises.
"The 118 same-sex couples who married with licenses issued by Montgomery County Register of Wills D. Bruce Hanes prior to the court ruling last week will remain in tax limbo until a clarification is issued," he said. "For now, they appear to be married for Pennsylvania state tax purposes but need to plan for the possibility that there will be a different ruling before tax returns are filed, or even thereafter."
About Marcum LLP
Marcum LLP is one of the largest independent public accounting and advisory services firms in the nation, with offices in major business markets throughout the U.S., as well as Grand Cayman, China and Ireland. Headquartered in New York City, Marcum provides a full spectrum of traditional tax, accounting and assurance services; advisory, valuation and litigation support; and an extensive range of specialty and niche industry practices. The Firm serves both privately held and publicly traded companies, as well as high net worth individuals, private equity funds and hedge funds, with a focus on middle-market companies and closely held family businesses. Marcum is a member of the Marcum Group, an organization providing a comprehensive array of professional services.