2015's 3 Biggest Tax Changes and How They Will Affect You
This year will go down in history as above-average for tax developments, thanks to two big Supreme Court decisions. Here are the three most significant tax-related stories for 2015.
1. Supreme Court removes last major barrier to Obamacare
In June, the Supreme Court’s King v. Burwell decision ratified the availability of Obamacare health insurance premium tax credits (subsidies) in states that do not run their own health insurance exchanges. The decision pretty much guaranteed that all the Obamacare tax increases will be with us through at least 2016 — and probably forever. If the Court had ruled the other way, Obamacare detractors had hoped to trade the nullification of some or all of these tax increases for an extension of the premium tax credits for folks who would have lost them. That possibility is now off the table.
2. Supreme Court legalizes same-sex marriage nationwide
In another June decision, Obergefell v. Hodges, the Supreme Court required states to license and recognize marriages between same-sex couples. Since the Supreme Court’s 2013 Windsor decision, members of legally married same-sex couples can (and must) file federal tax returns as married individuals. However, members of legally married same-sex couples who lived in states that didn't recognize same-sex marriages had to file state income tax returns as unmarried individuals.
Obergefell v. Hodges essentially makes the Windsor decision applicable for state tax purposes as well as for federal tax purposes. In other words, members of same-sex couples who are legally married under the laws of any state are now considered married for both state and federal tax purposes, regardless of where they live. Therefore, members of married same-sex couples who were previously not allowed to file state returns as married individuals should evaluate whether it is advantageous to file amended state returns for previous tax years. (That said, filing joint returns isn't always beneficial.) Going forward, members of married same-sex couples will file state returns in the same fashion as any other married individuals.
In Obergefell v. Hodges, the Supreme Court noted that non-tax implications of an individual’s marital status include inheritance and property rights; rules of intestate succession; spousal privilege in the laws of evidence; hospital access; medical decision making authority; adoption rights; the rights and benefits of survivors; birth and death certificates; professional ethics rules; campaign finance restrictions; workers’ compensation benefits; health insurance; and child custody, support, and visitation rights. Social Security benefits are also impacted, because members of same-sex married couples can now receive spousal and survivor benefits in all states. Previously, that wasn't true if an affected individual was married in one state but lived in another state that didn't recognize same-sex marriages.
3. Congress passes year-end tax legislation
On Dec. 18, Congress passed the Protecting Americans from Tax Hikes Act of 2015, and the president promptly signed the bill into law. The legislation resurrected a batch of personal and business tax breaks that had expired at the end of 2014. Because Congress habitually allows these breaks to go off the books before inevitably restoring them for a year or two, they have become known as “the extenders.” They are back on the books for 2015 and 2016, and some of them have even been made permanent. Wow!