As most of our readers are probably aware, New York legalized gay marriage last month, and as a result, there are now various changes in tax law for gay couples. As a recent New York Times article points out, the new rules will apply to all legally married gay couples living in New York, regardless of where they were married. Federal law, of course, does not recognize gay marriages, so gay couples in New York, at present, have a different tax status at the state and federal levels.
In order to assist gay couples in determining their rights and responsibilities under the new marriage equality law, the New York Department of Taxation and Finance recently published guidelines which will took effect on July 24. Here we will focus exclusively on the estate and gift tax guidelines. While these guidelines do not apply to New Jersey residents, it is interesting to consider how a close neighboring state is handling these issues.
In New York, estate taxes are normally owed on estates exceeding $1 million. Surviving spouses can, though, inherit an unlimited amount of assets with no estate tax. Same sex married couples are now able, like heterosexual couples, to transfer an unlimited amount of assets to one another during life and after death without tax consequences. At the federal level, same sex couples would still owe taxes on an estate exceeding $5 million, and will owe taxes on gifts exceeding the annual and lifetime exemption amounts.
One benefit of the new law is that same sex couples can use the same deductions and valuations available to heterosexual couples for purposes of calculating the size of a surviving spouse's estate.
In our next post, we'll continue looking at this subject.
Source: New York Times, "Tax Changes for Gay Married New Yorkers," Tara Siegel Bernard, August 3 2011.