By Blake Ellis
NEW YORK (CNNMoney) — The Supreme Court could decide the financial fate of thousands of same-sex couples this week.
A decision on the constitutionality of the 1996 Defense of Marriage Act, which defines marriage as solely between a man and a woman, is expected to be announced Wednesday. If the act is overturned, married same-sex couples in a dozen states will become eligible for more than 1,000 spousal benefits that are currently off limits.
The case challenging DOMA was filed on behalf of 83-year old New Yorker Edith Windsor, who sued to get back the $363,000 in estate taxes she paid when her wife of more than 40 years died — a tax bill she wouldn’t owe if she had been married to a man.
If the Supreme Court leaves DOMA standing, the battle for federal benefits will continue. But here’s what happens if DOMA is overturned:
Income tax: Same-sex couples would be able to file their federal income taxes jointly. For many couples — typically those in which one person earns significantly more than the other — merging incomes for tax purposes could result in big savings.
Janet and Janet Emery-Black, who married in California in 2008, estimate they could save more than $10,000 a year in income tax by filing jointly. Janet has always had a higher-paying job than her wife, who is now retired, so combining incomes would put them in a much lower tax bracket.
Other couples wouldn’t be helped by filing jointly, however — especially if their incomes are similar.
Gift tax: Currently, spouses in opposite-sex marriages can transfer unlimited assets to one another. But for same-sex couples, any gift of more than $14,000 begins chipping away at a lifetime gift limit of $5.25 million — after which a 40% gift tax is assessed. Same-sex couples who divorce can also be subject to the federal gift tax when dividing assets. If DOMA is overturned, however, this extra tax will disappear.
Health insurance: Many married same-sex couples would no longer have to pay extra income tax on the medical benefits one partner receives through the other’s health insurance plan. And federal employees will likely be granted spousal benefits, such as partner health insurance.
Death benefits: Same-sex couples would be eligible for the same federal tax treatment and Social Security benefits as opposite-sex couples in the event that one spouse passes away. This means a surviving spouse would be eligible for Social Security survivors benefits and exempt from the 40% federal estate tax on assets exceeding $5.25 million.
What the decision won’t do: Even if DOMA is overturned, many same-sex couples won’t receive federal spousal benefits. That’s because the majority of states still don’t allow same-sex marriage, and federal benefits would likely only be extended to those who are married at a state level and live in a state where that marriage is recognized, said Kyle Young, a financial adviser and vice president for Wells Fargo Advisors.
This also means that domestic partnerships and civil unions may not qualify for federal benefits,
Currently, same-sex marriage is legal in 12 states and Washington, D.C., while seven states grant domestic partnerships and civil unions, according to advocacy group the Freedom to Marry.
™ & © 2013 Cable News Network, Inc., a Time Warner Company. All rights reserved.