Unmarried couples face challenges when filing income taxes because of current tax laws. The filing status for each person in the couple can limit your exemptions and deductions. For the Internal Revenue Service, the legal status of your relationship with any household member is a major factor that reduces or increases each person’s taxable income.
Filing Status Restrictions
Before you can file your taxes, you must first select one of five tax filer status that the IRS recognizes. For unmarried couples, the options of married filing jointly or married filing separately do not apply. Each person in the couple must select single, or in some cases, head of household, if applicable. In addition, the IRS rules apply this status to your relationship as of the last day of the tax year.
The filing status regulations offer an exception. In states that recognize common-law marriages, an unmarried couple might be eligible to choose one of the two married filing categories. However, you must meet all your state’s common-law marriage requirements.
Dependents For Unmarried Couple
When one person in an unmarried couple has dependents, you must choose which person has the right to claim the dependent on their tax return. Generally, the natural parent of a qualified dependent can meet the IRS qualifiers for their dependents. If the other person in the couple wants to claim the dependent, be prepared to supply evidence that you have provided the support required and meet other dependent tests.
The IRS lets single filers to choose the head of household filer status only if you have dependents. Only one person with a qualifying dependent can be head of household. When both people in a couple have a dependent, you can’t combine the dependents and select head of household filing status for each person.
Unlike married couples, you cannot claim your living partner as your dependent, even if they meet other IRS income and support tests. Currently, IRS regulations allow you to claim specific relatives as dependents.
Unmarried Couples Deductions
Based on tax filing status, each person in an unmarried couple could be eligible to use the standard deduction or itemize their deductions. You’ll both need to choose which deduction option works best for each of you, each year. The IRS notes that the standard deduction for a head of household is higher than for a single filer or married couple filing separately.
Itemized deductions might decrease taxes for each of you or for your partner’s tax only. You can never share certain deductions like married couples who file jointly do. Mortgage interest is one common deduction that only one person in unmarried couples can claim. Even if both people contribute to the mortgage payments, often only one partner will be able to use the interest deduction, according to Nolo.
Unmarried Couples Estate Tax
When your partner in an unmarried couple leaves an estate, you might be responsible for paying estate tax. Married couples are automatically eligible for an exemption from estate tax for assets received from a spouse. For unmarried couples, the estate tax exemption limit is $11.58 million. However, the current exemption amount will increase annually due to inflation.
- Internal Revenue Service: Taxpayers Should Know And Understand Their Correct Filing Status
- Internal Revenue Service: Publication 501 (2019), Dependents, Standard Deduction, and Filing Information
- Nolo: Tax Issues for Unmarried Couples
- IRS. "Module 5: Filing Status." Accessed Feb. 17, 2020.
- Internal Revenue Service. "IRS Provides Tax Inflation Adjustments for Tax Year 2020," Accessed Feb. 17, 2020.
- Tax Foundation. "2020 Tax Brackets," Accessed Feb. 17, 2020.
- Taxpayer Advocate Service. "Know How Getting Married Changes Your Tax Situation." Accessed Feb. 17, 2020.
- IRS. "Publication 504 (2019), Divorced or Separated Individuals." Accessed Feb. 17, 2020.
- Internal Revenue Service. "Choosing the Correct Filing Status," Accessed Feb. 17, 2020.
- IRS. "Publication 501 (2019), Dependents, Standard Deduction, and Filing Information." Accessed Feb. 17, 2020.
Carol Luther has published feature articles in print magazines, ghostwritten blogs, and produced digital content since 2007. She has published personal finance and small business articles for the Houston Chronicle, Mahalo, the Nest, USA Today, Wahm, and Zacks. Carol has designed, implemented and managed multi-year, multimillion-dollar domestic and international projects services for higher education, nonprofits, and small to medium businesses for more than 20 years.