Same-sex couples often jump through legal hoops when dealing with their joint  finances — and owning real estate is no exception. If the Supreme Court strikes  down the law that defines marriage as the legal union between a man and a woman,  some, but not all, of these obstacles may be removed.

Gay CoupleWhen it comes to owning a house together, gay married couples can expect to  see a few changes if the Supreme Court rules that a part of the Defense of  Marriage Act, or DOMA, is unconstitutional. Those changes will affect the  mortgage interest tax deduction and Veterans Affairs home loans.

A Supreme Court ruling could have a harder-to-define effect in the 50 states  and District of Columbia. Each jurisdiction has its own laws regarding the  treatment of same-sex couples, as well as its own laws governing ownership of  real estate.

This article first describes what could happen federally with the mortgage  interest tax deduction and VA loans. Then, a clickable map summarizes how  same-sex homeownership is governed in the states.

Same-sex marriage and the mortgage tax deduction

Married gay couples who have a mortgage together will be able to claim the  mortgage tax deduction jointly if DOMA is struck down. That’s because without  DOMA’s federal definition of marriage, they will be allowed to file federal tax  returns jointly.

Currently, same-sex couples married in states that allow gay marriage have to  file their federal income taxes separately because DOMA prevents the federal  government from recognizing their marriages.

“If the federal government doesn’t recognize your marriage and you cannot  file jointly — even if, for state purposes, you do file jointly — then one  person is usually claiming the (mortgage) tax deduction even though in reality  two people are paying for the mortgage,” says Gideon Alper, an attorney in  Orlando, Fla. “Right now, I am taking the mortgage interest deduction on my  property, and my partner is not, even though we are both contributing to the  mortgage payment.”

Two unmarried people who have a joint mortgage can split the mortgage  interest tax deduction, as co-borrowers. Say they have $5,000 in interest to  deduct. Each co-borrower could claim $2,500. But splitting the deduction and  filing separately doesn’t always make financial sense to a couple. For example,  the deduction might not be higher than the standard deduction when it is split  in two.

Same-sex marriage and Veterans Affairs loans

Currently, a service member or veteran married to a person of the same sex  who wants to get a Veterans Affairs loan can’t include his or her partner as a  spouse on the loan. According to federal rules, the definition for spouse  requires the individual to be a “person of the opposite sex.”

They could get a VA loan with a joint loan, but unless both partners are  veterans, the VA would guarantee only the portion of the loan allocable to the  veteran. For example, if the two partners apply for a joint VA loan of $200,000,  the VA guaranty would apply to $100,000. Eliminating DOMA’s definition of  marriage would be the first step to allow the same-sex spouse of a veteran to  get the same rights as opposite-sex married couples.

The change wouldn’t be automatic because in addition to DOMA, Title 38 —  which governs VA benefits — also restricts the definition of spouse to  opposite-sex couples. But if DOMA is ruled unconstitutional, Title 38 would  likely go the same way, says Caren Short, an attorney at Southern Poverty Law  Center. She is co-counsel on a federal case challenging both DOMA and Title  38.

“Challenges to Title 38 exist, and they already are in a position to be  decided as soon as the Supreme Court decides on DOMA,” she says. “Courts that  have been waiting for that decision will also find Title 38  unconstitutional.”

Many real estate rules, including title laws, are governed by states, so  rules for same-sex couples who own property together vary by state.

The DOMA case before the Supreme Court focuses on whether the federal  government has the right to define marriage as the union between a man and a  woman. It will ultimately determine whether “the existing marriages of same-sex  couples will be recognized and respected for federal program purposes,” says  James Esseks, director of the Lesbian Gay Bisexual Transgender and AIDS Project of the American Civil Liberties Union.

The case challenges only Section 3 of DOMA. Another part of the law, Section  2, says that states don’t have to recognize marriages of same-sex couples even  if they are legally married in another state. That section is not the issue  being considered by the court. Unless the court’s opinion says states must  recognize same-sex marriages performed in other states — which is unlikely —  little will change in states that don’t allow gay marriages.

States and districts where same-sex marriage is legal:

  • Connecticut
  • Delaware (as of July 1, 2013)
  • District of Columbia
  • Iowa
  • Maine
  • Maryland
  • Massachusetts
  • Minnesota (as of Aug. 1, 2013)
  • New Hampshire
  • New York
  • Rhode Island (as of Aug. 1, 2013)
  • Vermont
  • Washington

Marriage is a legal status that provides the spouses a variety of reciprocal  obligations, rights and protections. Heterosexual marriages in each state are  recognized by all other states, as well as by the federal government.

These states already treat same-sex married homeowners with equal rights.  Married couples can take title to the house as spouses regardless of sex or  sexual orientation. The overturning of DOMA would give same-sex couples in these  states additional rights on a federal level, including claiming the mortgage tax  deduction as a couple filing federal taxes jointly.

States where civil unions are recognized:

  • Colorado
  • Hawaii
  • Illinois
  • New Jersey
  • Delaware (until July 1, 2013)
  • Rhode Island (until Aug. 1, 2013)

A civil union is a legal status that provides legal protection to same-sex  couples in the applicable states only. Civil unions typically are not recognized  outside the couples’ state of legal residency.

In these states, same-sex couples can own a home with similar rights to  married couples. As partners in a civil union, they can hold title through  tenancy by the entirety, which is a right that used to be available only to  “husband and wife.”

With tenancy by entirety, the parties own an undivided part of the property,  which means a spouse can’t sell his or her interest in the property without the  other spouse’s signature. Another benefit to this method is that, when one  spouse dies, the property automatically reverts to the survivor without going  through probate. Tenancy by entirety also protects spouses from creditors  because a creditor is not allowed to take away the home to satisfy the debt of  one spouse.

Colorado does not have tenancy by entirety. Instead, the state has marital  property rules, meaning that any property acquired by a spouse during the  marriage belongs to both parties. Partners in a civil union in Colorado have  these marital property rights.

Still, couples in these states could remain at a disadvantage with regards to  the mortgage tax deduction and other federal benefits. That’s because even if  the federal government recognizes gay marriage, it remains unclear whether civil  unions would be treated as marriages on a federal level.

States that recognize domestic partnerships:

  • Nevada
  • Oregon
  • Wisconsin

A domestic partnership is a state-sanctioned legal status that allows  unmarried couples, heterosexual and same-sex, to formalize their relationships  and which extends some state rights to those couples.

These states allow domestic partnerships, but not all grant the same spousal  rights to domestic partners when it comes to owning real estate as a couple. In  Nevada and Oregon, partners in a domestic partnership have the same title rights as married couples.

In Wisconsin, partners can inherit property without a will. As long as the  deed lists them as domestic partners, the property can be transferred  automatically if one partner dies. But when partners separate, they don’t have  the same marital benefits for the division of property.

Washington is a special case: As of 2014, the state will allow domestic  partnerships only to couples who are 62 years of age of older. Domestic partners  don’t have any of the community property rights that married couples have.

State that recognizes domestic partnerships, complicated by Proposition  8:

  • California

A domestic partnership is a state-sanctioned legal status that allows  unmarried couples, heterosexual and same-sex, to formalize their relationships  and which extends some state rights to those couples.

The most populous state allows domestic partnerships. In May 2008, the  California Supreme Court legalized gay marriages. Five months later, voters  approved Proposition 8, which bans the marriage of same-sex couples. That law  has been challenged and is under review by the Supreme Court, separately from  the DOMA challenge.

California has community property laws, which is the presumption that  property acquired during marriage belongs to both spouses. Registered domestic  partners in California have the same community property rights as married  couples. During the period gay marriage was legal in California, about 18,000  couples got married. The Supreme Court is expected to rule on the  constitutionality of Proposition 8 by July. If ruled unconstitutional, same-sex  marriage would resume in California — and, potentially, similar bans in other  states could be affected, as well.

There’s a series of potential outcomes for the Proposition 8 case, says James  Esseks, director of the Lesbian Gay Bisexual Transgender and AIDS Project of the  American Civil Liberties Union.

“One of them is, gay couples get to get married in California, but it does  not affect any other state,” he says. “There is another version that could say  every state in the country has to allow same-sex couples to marry. People are  not superoptimistic that that is going to happen, but it could happen. Then that  would change this issue about whether (same-sex) people can get married at  all.”

States that do not allow same-sex marriage, civil unions or domestic  partnerships:

  • Alabama
  • Alaska
  • Arizona
  • Arkansas
  • Florida
  • Georgia
  • Idaho
  • Indiana
  • Kansas
  • Kentucky
  • Louisiana
  • Michigan
  • Mississippi
  • Missouri
  • Montana
  • Nebraska
  • New Mexico
  • North Carolina
  • North Dakota
  • Ohio
  • Oklahoma
  • Pennsylvania
  • South Carolina
  • South Dakota
  • Tennessee
  • Texas
  • Utah
  • Virginia
  • West Virginia
  • Wyoming

Same-sex couples in these states don’t have the benefits and protections that  married couples get. They are not allowed to hold title with tenancy by entirety  in states where this right is available to opposite-sex couples. With tenancy by entirety, the parties own an undivided part of the property, so a spouse can’t  sell his or her interest on the property without permission from the other. When  one spouse dies, the property automatically reverts to the survivor without having to go through probate. Tenancy by entirety also protects spouses from  creditors as creditors are not allowed to foreclose on the home to satisfy the  debt of one of the spouses.

In states with community property laws — which say that property acquired  after the marriage belongs to both spouses regardless of who paid for it — the  rights are reserved solely for opposite-sex couples.

Generally, same-sex couples in these states own property as tenants in common  or as joint tenants with rights of survivorship. These methods are often used by  business partners or relatives who own property together. While they grant the  homeowners similar rights of joint ownership, they don’t offer the full  protection that married couples get. The rules in these states won’t change with  the DOMA ruling, unless the court requires states to recognize same-sex  marriages performed in other states.