According to a 2016 census, over 8 million unmarried couples are currently living together. As a result, this has presented millions of taxpayers with a potentially complicated tax situation.
Many taxpayers present me a commonly asked question of whether or not a boyfriend or girlfriend can be claimed as a dependent on your federal income taxes.
The answer by the IRS is whether or not the partner fulfills the definition of a “qualifying relative.”
The IRS defines a relative as meeting the three test pillar regarding residency, income, and financial support.
Is your significant other a member of your household? Do they currently live with you and have they lived with you for the entire calendar year even with temporary absences related to vacations and medical treatments?
Note: This test can get tricky if you living situation violates local law. Dependent status can not be claimed if “cohabitation” by unmarried people is against the law.
Does your significant other earn income? If they earn over the gross income threshold, then that person can not be claimed as a dependent.
Gross income is defined as any taxable income which includes wages, interest, or other taxable income. The limit for gross income varies yearly, but was set at $4,150 for 2018.
Note: A married individual may not be claimed as a dependent if they file a joint return with their spouse.
To qualify for this pillar, you must have paid more than half of your partner’s living expenses during the calendar year.
This requires a bit of record keeping as it counts money received from you, outside parties, and their funds.
Food for thought: Is the “relative using money from their savings account? Calculate the other individuals living expenses for the entire household. If what they are contributing towards housing, utilities, and food exceeds half, then that individual can not be claimed as a dependent.
Need further assistance?
The IRS website offers an online "assistant" that can help you determine whether your boyfriend or girlfriend qualifies as a dependent.
Here is the link to the 15 minute test: https://www.irs.gov/help/ita/whom-may-i-claim-as-a-dependent
Need additional explanation? Contact us to schedule an appointment to review your individual tax situation.