For example, the special tax rule that allows a married couple to exclude up to $500,000 of gain from sale of a principal residence is worded as follows (highlight added):
Section 121(b)(2) - "Special rules for joint returns. In the case of a husband and wifewho make a joint return for the taxable year of the sale or exchange of the property—
(A) $500,000 limitation for certain joint returns. Paragraph (1) shall be applied by substituting “$500,000” for “$250,000” if—
(i) either spouse meets the ownership requirements of subsection (a) with respect to such property;
(iii) neither spouse is ineligible for the benefits of subsection (a) with respect to such property by reason of paragraph (3)."
If the Supreme Court finds that the Defense of Marriage Act (DOMA; P.L. 104-199) is unconstitutional, it should then mean that the federal government will treat couples married per state law as married. It doesn't mean it will find them to be "husband and wife." So, it appears that there would still need to be some fixes to the tax law to truly allow all married couples to be treated similarly under the federal tax law (and perhaps other federal laws also have language in need of change).
Congress could just add a statement to the law that any reference to husband and wife means any couple married under state law. Or perhaps the IRS can make that interpretation.
And it goes beyond "husband and wife." The term "his spouse" is used 63 times in the Internal Revenue Code! Just shows that the language is a bit dated - assumes taxpayers are male!
There would also be the issue of whether the IRS would expect same-sex couples to amend returns to file jointly. I don't think they will. But, if a couple would have a tax savings, they should be able to. As the Reuters article points out though, many same sex couples, particularly if both have similar income and they are beyond the 15% tax bracket, will have a marriage penalty! That is, when they file jointly, their taxes will be higher than when they file two returns as single (or perhaps one uses head-of-household status). The marriage penalty is something that we likely won't see disappear from the law anytime soon (the fix Congress put in place temporarily in 2001 and made permanent in 2012 only helps if you are in the 15% bracket).
There will by several tax considerations if the Supreme Court overturns DOMA (which it should do). Some of these relevant tax rules for same sex married couples include taxation of fringe benefits, estate planning, retirement plans, and how dependents are claimed.
I believe a decision is expected in June.
