Yesterday evening, I was part of a panel discussion at St. John’s University School of Law to discuss some tax implications arising from the Marriage Equality Act. Last August, I covered a few items. An audience member wrote to me earlier today with some follow up questions. They are good questions, so I decided to post the answers here.
Question 1: Some of the benefits available to heterosexual couples are available to same-sex couples such as domestic partner health insurance coverage, especially employment and health insurance benefits. How does this change impact the tax circumstances of married same-sex couples?
Answer: For federal income tax purposes, there is no change. In general, an employee’s health benefits are tax free for spouses and dependents under an employer-sponsored program. If a domestic partner does not qualify as a dependent under section 152 of the Internal Revenue Code, then the cost of providing the benefits for the domestic partner is taxable income to the employee.
The Tax Parity for Health Plan Beneficiaries Act is a bill that would put domestic partners on equal footing with spouses and dependents in this situation. Four previous versions of the bill died in committee.
For New York income tax purposes, however, there likely is a change. It seems clear that the cost of providing health care benefits to a same-sex married spouse is no longer subject to New York state income tax.
Keep in mind the NYS Tax Department has not yet commented on this specific issue. Considering the Marriage Equality Act mandates equal treatment of same-sex and different-sex married couples under all laws of the state, I cannot see how the tax department would view otherwise.
Question 2: Can same-sex spouses who were married in a different state prior to the enactment of the Marriage Equality Act retroactively file as married spouses in New York?
The Marriage Equality Act is effective for tax years ending on or after July 24, 2011. A same-sex married couple who was legally married in another state sometime before July 24, 2011 is considered not married for New York tax purposes until July 24, 2011. Therefore, a same-sex married couple cannot use a married filing status prior to the 2011 tax year.