Supreme Court ruling opens door to tax breaks, health coverage and retirement benefits. By Susan B. Garland, Contributing Editor June 26, 2013 The U.S. Supreme Court ruling that struck down the federal Defense of Marriage Act, or DOMA, will give married same-sex couples access to the same tax breaks, health coverage and retirement benefits as married heterosexual couples. The decision will only affect couples in 13 states and the District of Columbia, where marriage of same-sex couples is legal. The following are among the changes.Retirement benefits. Married same-sex couples will be able to file for Social Security spousal and survivor benefits. They'll also be able to employ a number of strategies that will enable them to maximize total household benefits. "Claiming strategies available to spouses can significantly increase lifetime benefits for couples," says Jonathan Guyton, a certified financial planner and principal of Cornerstone Wealth Advisors, in Edina, Minn. See Also: Social Security Special Report For example, the higher earner in the couple may want to delay claiming benefits until age 70, racking up 8% in delayed retirement credits for each year he or she delays beyond the full retirement age of 66 (for those born between 1943 and 1954). By delaying, he or she can leave a higher survivor benefit to the lower earner. A survivor benefit, taken at full retirement age or later, is based on 100% of the higher earner's benefit. The ruling also will change the status of same-sex married couples under employer retirement plans. With 401(k) plans, the account automatically goes to the spouse when the worker dies unless the spouse waives his or her right to the money in writing. Defined-benefit pension plans guarantee that a spouse will continue to get a benefit if the retiree dies first, unless both the retiree and spouse waive this right. If the worker dies before retirement age, the surviving spouse is entitled to an annuity. With both the 401(k) and the pension plan, it's essential to check out the actual wording of plan documents. Some plans define spouse as a different-gender spouse and may need to revise the wording. In the meantime, spouses should be entitled to the benefits, according to experts. Advertisement A working spouse in a same-sex married couple who file a joint federal return will be able to make a contribution to a "spousal IRA" for a spouse who earns little or no income. As long as the working spouse's income covers the contribution, he or she can contribute up to $5,500 to the account (and an extra $1,000 if the worker is 50 or older). The contribution may be tax deductible, though deductibility phases out over certain income limits. The DOMA decision also opens options for same-sex couples when it comes to inherited IRAs, says J.T. Hatfield Charles, a certified financial planner for Raymond James Financial Services, in Rockville, Md. A spouse has more rights than a nonspouse beneficiary under federal law, says Charles, whose practice focuses on domestic partners (same-sex marriage is legal in Maryland). A spouse can roll the traditional IRA into his or her own IRA and delay taking required minimum distributions until age 70 1/2. A nonspouse beneficiary must start taking withdrawals by December 31 of the year following the year the IRA owner dies, or must empty the account within five years after the owner dies. The ruling could allow a husband in a same-sex couple "to take distributions for the rest of his life and allow the IRA to grow and defer taxes," Charles says. (Also, a spouse never has to take RMDs from a Roth IRA, but a nonspouse must.) Income taxes. By being able to file a joint return, many same-sex couples may find their federal tax tab dropping. Married couples sometimes pay less in taxes than those who file individually, especially if one spouse earns substantially more than the other, says Marc List, a certified public accountant and lead managing director of CBIZ MHM, in Boca Raton, Fla. "Each couple should look at returns to see if there are advantages for filing a joint return," List says. He also notes that married same-sex couples may be able to file amended returns for the tax years they had been legally married. Advertisement List uses this example: In the 2012 tax year, the 33% marginal tax rate began at $217,450 for joint filers and $178,650 for single filers. If one spouse earned $180,000 while the other earned nothing, the earner would have had to file a single return and pay at the 33% rate. By filing a joint return, the couple would have been able to pay income tax at the 28% rate. Also, by filing jointly, a couple may be eligible for certain tax breaks. They'll also be able to share capital gains and capital losses, for example. Health benefits. Companies with domestic-partner benefits programs usually offer health benefits to the partner of the employee. But the employee was required to pay income tax on the "imputed" value of the coverage. "Now federal law recognizes that an employee will no longer pay tax on the value of coverage for the same-sex spouse," says J.D. Piro, senior vice-president of benefits consulting firm Aon Hewitt. Also, expect an expansion of Medicare coverage—and smaller premiums for some couples. A nonworking spouse who is 65 or older is eligible for Medicare if his or her spouse has worked in Medicare-covered employment for at least ten years. But DOMA had excluded nonworking spouses in same-sex marriages from the same access to federal health benefits. Advertisement Same-sex married individuals were still able to qualify for Medicare, but they had to meet all of the requirements on their own. Otherwise, they had to pay hefty premiums to buy into Medicare Part A, which covers hospital services, with premiums ranging from $248 to $451 a month. Part A is free for qualified individuals. Caregiving. Before the Supreme Court ruling, an employee who wanted to take time off from work to care for an ailing same-sex spouse had no protection under federal law. With the ruling, same-sex married couples are covered by the Family and Medical Leave Act, which allows eligible workers to take up to 12 months of unpaid leave to care for a spouse or a child with a serious medical condition. Private sector employers with 50 or more employees working for at least 20 workweeks in the current or preceding calendar year must provide this coverage. So must public employers. Estate taxes. The DOMA case was based on the issue of federal estate taxes. Edith Windsor, a resident of New York, married Thea Spyer, her longtime partner. When Spyer died, her estate was required to pay $363,000 in federal estate taxes. The estate would have paid nothing if the federal government had recognized their marriage. Windsor sued. Advertisement Robert Keebler, a certified public accountant in Green Bay, Wis., notes that nonmarried couples can leave estates tax-free up to the federal exemption amount of $5.25 million in 2013. Anything above that is subject to an estate tax of up to 40%. Now that DOMA has been struck down, if you're a spouse in a same-sex couple, Keebler says, "you can leave all of your property to your spouse," and the estate will not owe any tax, no matter how large the estate. Limits on gifts also are lifted. You can't give more than $14,000 a year in 2013 to a nonspouse individual without having to file a gift-tax return. The amount of the gift above $14,000 counts against the $5.25 million estate-tax exemption in what's known as the unified credit. Say one spouse bought a house in his name for $1 million, says Charles. Before the Supreme Court ruling, if he wanted to share title of the house with his partner, he would have to file a gift tax return for $486,000—the $500,000 share minus the annual $14,000 gift-exemption amount. "It's no longer a challenge," he says. Haven't yet filed for Social Security? Create a personalized strategy to maximize your lifetime income from Social Security. Order Kiplinger’s Social Security Solutions today.