How will couples in same-sex marriages file their state taxes if they live in a state that doesn’t recognize their marriage?

We don’t know.

Why is this an Issue?

Most states with an income tax use the federal tax return as the starting point for filing the state tax return.

So for a same-sex couple living in a non-recognition state, they’ll have a potential problem if the IRS decides to recognize their marriage for federal tax purposes but the state they live in doesn’t recognize their marriage.

This could create a strange circumstance where the couple would have to file their federal taxes as married, recalculate their taxes as if they were single, and then file their state taxes as single people.

Another potential issue could come with a couple that lives in a recognition state but who works in a non-recognition state. How will they file their non-resident state tax return?

Examples

Let’s use Nebraska as an example of a non-recognition state. Nebraska has a constitutional amendment that explicitly prohibits the state from recognizing same-sex marriages.

Scenario 1: The couple gets married in Iowa but lives in Nebraska; IRS Says their Marriage Isn’t Recognized

In this scenario, the couple would clearly be unmarried in Nebraska because they would be unmarried for federal tax purposes.

Scenario 2: Couple Gets Married in Iowa, Lives in Nebraska, IRS Recognizes Their Marriage

This is trickier. Nebraska tax law says a person’s filing status for Nebraska purposes is the same as their filing status on their federal tax return:

Married shall mean a person who would file a federal individual income tax return as married filing jointly or separately if required to file a return.

(Nebraska Revenue Statute 77-3505.01)

But the Nebraska Constitution says:

Only marriage between a man and a woman shall be valid or recognized in Nebraska. The uniting of two persons of the same sex in a civil union, domestic partnership, or other similar same-sex relationship shall not be valid or recognized in Nebraska.

The Constitution trumps the revenue statute. I think this couple would have to recalculate their federal taxes as single and file their Nebraska taxes as single people.

Scenario 3: Taxpayer is in a Same-Sex Marriage, Lives in Iowa But Works in Nebraska

This is tricky. This taxpayer will file as married for federal and Iowa purposes, but what about the Nebraska non-resident tax return?

I think they would have to file as single. Nebraska wouldn’t recognize the person’s marriage if they lived in Nebraska, so I doubt they would recognize the person’s marriage as a non-resident.

On all 3 of these scenarios, we need guidance from the IRS on the federal tax status of a couple living in a non-recognition state, but we’ll also need guidance from states on the state tax treatment as well.

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