The U.S. Department of the Treasury and the Internal Revenue Service (IRS) today ruled that same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes. The ruling applies regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriage or a jurisdiction that does not recognize same-sex marriage.
The ruling implements federal tax aspects of the June 26 Supreme Court decision invalidating a key provision of the 1996 Defense of Marriage Act.
Under the ruling, same-sex couples will be treated as married for all federal tax purposes, including income and gift and estate taxes. The ruling applies to all federal tax provisions where marriage is a factor, including filing status, claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA and claiming the earned income tax credit or child tax credit.
Any same-sex marriage legally entered into in one of the 50 states, the District of Columbia, a U.S. territory or a foreign country will be covered by the ruling. However, the ruling does not apply to registered domestic partnerships, civil unions or similar formal relationships recognized under state law.
Legally-married same-sex couples generally must file their 2013 federal income tax return using either the married filing jointly or married filing separately filing status.
Individuals who were in same-sex marriages may, but are not required to, file original or amended returns choosing to be treated as married for federal tax purposes for one or more prior tax years still open under the statute of limitations.
If you make a work-related move this summer, you may be able to deduct the costs of the move. This may apply if you move to start a new job or to work at the same job in a new job location. The IRS offers the following tips on moving expenses you may be able to deduct on your tax return.
In order to deduct moving expenses, you must meet these three requirements:
1. Your move closely relates to the start of work. Generally, you can consider moving expenses within one year of the date you first report to work at a new job location. Additional rules apply to this requirement.
2. You meet the distance test. Your new main job location must be at least 50 miles farther from your former home than your previous main job location was. For example, if your old main job location was three miles from your former home, your new main job location must be at least 53 miles from that former home.
3. You meet the time test. After you move, you must work full time at your new job location for at least 39 weeks during the first year. Self-employed individuals must meet this test and also work full time for a total of at least 78 weeks during the first 24 months upon arriving in the general area of their new job location. If your income tax return is due before you have satisfied this requirement, you can still deduct your allowable moving expenses if you expect to meet the time test.
See Publication 521, Moving Expenses, for more information about these rules. If you can claim this deduction, here are a few more tips from the IRS:
- Travel. You can deduct transportation and lodging expenses for yourself and household members while moving from your former home to your new home. You cannot deduct the cost of meals during the travel.
- Household goods. You can deduct the cost of packing, crating and transporting your household goods and personal property. You may be able to include the cost of storing and insuring these items while in transit.
- Utilities. You can deduct the costs of connecting or disconnecting utilities.
- Nondeductible expenses. You cannot deduct as moving expenses any part of the purchase price of your new home, the costs of buying or selling a home, or the cost of entering into or breaking a lease. See Publication 521 for a complete list.
- Reimbursed expenses. If your employer reimburses you for the costs of a move for which you took a deduction, you may have to include the reimbursement as income on your tax return.
- Update your address. When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive mail from the IRS. File Form 8822, Change of Address, to notify the IRS.
- Tax form to file. To figure the amount of your deduction for moving expenses, use Form 3903, Moving Expenses.
I attended a land auction recently where river-front land was sold. The real estate was marketed as a “hunter’s paradise” as it was about 90 acres of completely natural pastureland. However, the land was being sold subject to a lawsuit pending determination of access to the otherwise landlocked parcels. The final sales price was $51,000, which works out to about $566/acre.
The sales price is probably still high if one considers the return on investment way of calculating price.
The sales price is probably low if one considers the market value for recreational land.
However, on the whole, it should be noted that prices fluctuate and really are the result of many factors. This land could have brought more and easily could have brought less, but the sales price of $566/acre is much less than the county average of about $980/acre and less than the appraised price of $800/acre for the parcel. Just a thought as you look toward your own assets and estate plan. The value for federal estate tax purposes can vary greatly and only upon sale between a willing buyer and a willing seller can one determine how much in taxes should really be due.
The President recently announced that he would favor lowering of the corporate tax rate to 28%. This would drop the rate from its current highest marginal rate of 35%, which is the highest of the developed countries. The 28% rate would be below the median for most developed countries and would, in theory, make the U.S. a more attractive place for businesses.
However, the change would not come without significant ramifications. Namely, the change in the corporate rate, but not the individual rate, would mean that the largest businesses in America would be paying rates much less than most small businesses. The reason for this is the pass-through type of taxation for most small businesses. The pass-through taxation results in the business profits being taxed at the owners’ marginal tax rates. With the imposition of the Affordable Care Act and recent changes to the tax law, this rate can be up to 43.5% at the federal level.
If one considers favorable dividend rates for distributions, the majority of large companies and their shareholders would pay much lower rates than successful small business (especially considering FICA taxes.) I am all for lowering the corporate tax rate, but tax reforms need to be considered all across the Tax Code, and playing favorites with certain provisions is what caused it to be the jumbled mess it is today.