American Same Sex Couples in Canada: Tax Effects of the Recent Supreme Court Decision in Windsor v. US

DOMA (Defense Of Marriage Act), Same Sex Couples, Windsor v. U.S.

August 27, 2013

On June 26, 2013, the US Supreme Court overturned Section 3 of the US Federal Defense of Marriage Act, more commonly known as “DOMA”. The effect of this decision is that the U.S. federal government is now required to recognize lawful same-sex marriages where the couple resides in a jurisdiction that recognizes that marriage.

A same sex couple where one or both spouses are American citizens who live in Canada will now be treated like any other married couple for purposes of U.S. federal tax. Here are some of the tax implications:

Requirement to file as either married filing separately or married filing joint (where both spouses are U.S. citizens or the non-citizen spouse has elected to be treated as a US tax resident);
Availability of spousal exemptions for US estate and gift tax; where both same-sex spouses are U.S. citizens, one spouse may make unlimited gifts to the other with no gift tax implications; where the donee spouse is a non-U.S. citizen, there is an annual exclusion that adjusts yearly for inflation; in 2013, this amount is $143,000; and
Portability of a deceased US-citizen spouse’s unused estate tax exemption to the surviving US-citizen spouse.

Aside from these tax benefits, the repeal of DOMA also allows same sex spouses to claim certain benefits under US Social Security and US government and military pensions.Same sex marriage is currently recognized in the following US states: California, Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont, Washington, the District of Columbia, and certain counties in New Mexico[1]. The U.S. Treasury has announced though that the any lawfully performed same sex marriage will be recognized for federal tax purposes regardless of where the couple is domiciled.

[1] Three counties in New Mexico currently allow same sex marriages: Santa Fe, Doña Ana (Las Cruces) and Bernalillo (Albuquerque). Source: freedomtomarry.org