Will Same-Sex Couples Save or Lose Money By Filing a Tax Refund?

Same-sex couples are now recognized by the IRS – but that’s not necessarily good for their finances.

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The Internal Revenue Service changed its policies in August and decided to recognize same-sex marriages regardless of whether couples live in a state where their marriage is legal.

With the switch, couples who were denied federal benefits under the Defense of Marriage Act – which the Supreme Court struck down in June – have the opportunity to claim a retroactive refund and correct their tax return from 2010 to 2012.

Buyer beware, not every couple benefits from the change. Some couples will pay more as a married couple filing jointly than when filing as two individuals. Read below to see if the tax refund will save you money or cause you to fork over more to the IRS.

Will my marriage lower my tax bill?

When a couple gets married, their tax filing status changes. According to the IRS, they are no longer two individuals – they are a married couple – and they can file jointly or separately.

The good news for same-sex couples: Married couples are considered a unit and can share tax deductions – something two individuals cannot do.

Here's the bad news: Tax brackets for couples and individuals are not equal. Married couples hit a higher marginal tax rate much quicker than an individual would. Same-sex couples who collectively earn more than $146,400 in taxable income – that's income minus deductions – will likely see their tax bill go up. If you fall into that category, then you might not be eligible for a tax refund.

Marginal Tax Rates for a Gay Couple of Equal Earners
  Under DOMA After DOMA
Marginal Rate Income Threshold Income Threshold
10% $0 $0
15% $17,850 $17,850
25% $72,500 $72,500
28% $175,700 $146,400
33% $366,500 $223,050
35% $796,700 $398,350
39.6% $800,000 $450,000

How to claim your refund: File the 1040X

Same-sex couples can file for a refund three years from the date their original return was filed or two years from the date the tax was paid. This means, at most, couples are eligible for refunds from tax years 2010, 2011 and 2012. You must have been married each year for which you'd like a refund. Note that domestic partnerships, civil unions and other formal relationships are not offered this benefit.

The statute of limitations applies not only to income tax but also to gift and estate taxes. For a refund on income tax, file Form 1040X (the amended U.S. individual income tax return). Simply check your new filing status in line C, adjust your income and deductions accordingly and submit.

An additional bonus for the income-tax refund: You can reclaim any taxes on fringe benefits, which are usually provided by an employer and tax exempt for married couples. For example, married couples may purchase spousal health insurance from their employer on a pre-tax basis. Under DOMA, the spousal benefits for same-sex couples were often taxed. Now, couples are eligible for a refund on those taxes.

The refund on gift and estate taxes applies to couples who have lost their spouse and whose inheritance was heavily taxed. Same-sex couples who were taxed before the rule change can file Form 843.

It usually takes eight to 12 weeks for the IRS to process amended returns, but it may take longer during busy periods.

Mike Anderson  is an analyst for NerdWallet, a financial-literacy company dedicated to helping consumers make better decisions with their wallet and file their taxes error-free.