Tax Issues for Unmarried Couples

Many couples choose to live together without being married -- some may be feeling out the possibility of marriage, while others have no expectations of marriage. Although there are some perks to living with your partner, you may also encounter financial and tax issues.

Income Tax

When an unmarried couple cohabitates, both partners will need to file an individual tax return at the end of the year. Unmarried couples may not file a joint tax return.

The Child Tax Credit

Unmarried partners may be able to use the "head of household" filing status if they support a child dependent. If your child lives with you and your partner, one of you may file as head of household to claim the child tax credit, but only if you've provided at least 50% of the financial support for the child.

Additionally, you can only claim the credit if your child lived with you for the last six months of the tax year. Married couples filing a joint tax return don't need to make this consideration because they will add the child to the complete tax form and the math will work itself out. That said, in some cases, married spouses with a higher income may not qualify for the child tax credit.

Claiming Your Partner as a Dependent

Qualified individuals can claim their partner as a dependent if the partner:

• isn't a "qualifying child" of another taxpayer (such as your partner's parent)
• earned less than $4,400 in taxable income in 2022
• did not provide support for themselves, meaning you provided more than half of your partner's financial support for the year, and
• lived with you all year as a member of your household.

Property and Mortgage Interest Deduction

Many unmarried couples own a home together, which can sometimes create complications at tax time. If you live with your partner, and the mortgage is in just one partner's name, only the listed partner can claim a deduction for mortgage payments and interest, even if the unnamed partner contributed to or covered the payments.

In one case, an unmarried couple lived in the boyfriend's home. The mortgage was in the boyfriend's name, but both contributed to the household bills, including the mortgage payment. Over time, the couple had a child, and the boyfriend quit his job and became a stay-at-home parent. For four years, the girlfriend paid the mortgage each month. Eventually, the couple added the girlfriend's name to the deed and mortgage.

When the girlfriend claimed the prior four years of mortgage payments and interest on her taxes, the Internal Revenue Service (IRS) rejected her request, stating that she could only receive a credit for the money she paid after she was legally responsible for the mortgage. In this case, the woman was out over $10,000 because she was unmarried and paying someone else's bill. (Wheeler v. Commissioner, T.C. Summary Opinion 2011-83, July 6, 2011.)

Estate and Gift Taxes

Anyone can leave up to $13.61 million (in 2024) at death without incurring federal gift or estate tax. Married couples can leave even more. Married people can leave any amount of property to their spouse without tax penalty. Further, married couples can share their $13.61 individual exemptions so that if Spouse A dies without using any (or all) of his individual estate tax exemption, Spouse B can choose to use his exemption and leave up to $27.22 million without owing estate tax.

Of course, most people -- married or not -- do not need to worry about federal estate taxes at all because they don't have $13 million. State estate taxes are a somewhat different matter because, in the handful of states that levy estate taxes, the exemptions are lower than the federal exemption. You can learn more about state and federal estate and gift taxes in the Estate and Inheritance Taxes section of Nolo.com.