On August 29, 2013, the Department of the Treasury and the Internal Revenue Service (IRS) together issued a news release along with Revenue Ruling 2013-7 addressing federal policy changes with regards to same-sex couples. While many details are yet to be ironed out, the federal pronouncements clarify that same-sex couples—legally married in a state or country that recognizes their marriage—will now be treated as married for federal tax purposes.
The pronouncements clarify that a same-sex marriage will be recognized for Federal tax purposes if the same-sex marriage was valid in the state or country where it was entered into, regardless of whether the couple’s marriage is recognized in a subsequent place of residence. While these pronouncements represent a major shift in federal tax policy concerning same-sex couples, it is important to note that registered domestic partnerships, civil unions, and other formal—non-marriage—relationships recognized under state law will still not be recognized as marriages for federal tax purposes.
For married same-sex couples, the ruling applies to all federal tax provisions including retirement plans and individual retirement arrangements (IRAs) where marriage is a factor. With respect to IRAs, there will be implications with beneficiary designations, required minimum distributions (for beneficiaries and for some IRA owners), Roth contribution eligibility, tax deductions for Traditional IRA contributions, tax credit eligibility and anything else that is effected by marital status and/or tax filing status.
The Department of Treasury and IRS will begin applying the terms of Revenue Ruling 2013-17 on September 16, 2013. The Treasury and IRS also intend to issue further guidance on how qualified retirement plans, and other tax-favored arrangements (presumably including IRAs) should treat same-sex spouses for periods prior to the September 16, 2013 effective date.”