Do Domestic Partners File Taxes Together?

Domestic partners face distinct federal and state income tax rules compared to married couples, particularly regarding joint filing. This article explains the general principles of tax reporting for unmarried couples in a domestic partnership, outlining their specific filing obligations.

Federal Tax Filing Status

The Internal Revenue Service (IRS) does not recognize domestic partnerships or civil unions as a marriage for federal tax purposes. This means domestic partners cannot file federal income taxes jointly using the “married filing jointly” or “married filing separately” statuses. Instead, each partner must file their federal return as either “Single” or, if they meet specific criteria, “Head of Household.”

The “Single” filing status is the most straightforward option for domestic partners without dependents. Each partner files their tax return independently, reporting their own income, deductions, and credits. This means each individual’s tax liability is calculated separately, without combining incomes or directly sharing deductions and credits with their partner.

The “Head of Household” filing status offers more favorable tax rates and a higher standard deduction compared to filing as “Single.” For example, for 2024, the standard deduction for Head of Household filers is $21,900, significantly higher than the $14,600 for Single filers. To qualify for Head of Household, an individual must be considered unmarried on the last day of the tax year, pay more than half the cost of keeping up a home for the year, and have a qualifying person living with them for more than half the year. A qualifying person can be a qualifying child or a qualifying relative.

A domestic partner cannot be the only qualifying person for the Head of Household status. The IRS states that a registered domestic partner is not a specified related individual who qualifies a taxpayer to file as Head of Household, even if that partner is a dependent. Therefore, if one partner claims Head of Household, it must be due to a qualifying child or another qualifying relative, not solely the domestic partner. If both partners contribute to household costs, only one may claim Head of Household if they meet the over 50% support test for a qualifying person.

Because they cannot file jointly at the federal level, domestic partners cannot combine incomes to potentially fall into lower tax brackets available to married couples. They also cannot directly share certain deductions and credits in the same way married couples can. Each partner must claim their own deductions and credits, which can sometimes result in a higher overall tax liability compared to a married couple with similar combined income and expenses.

State Tax Filing Considerations

While federal tax rules for domestic partners are uniform across the United States, state tax laws can differ considerably regarding the recognition of domestic partnerships and their tax implications. Many states do not recognize domestic partnerships for tax purposes, aligning with federal treatment, and require partners to file separate state income tax returns.

Some states, however, do acknowledge domestic partnerships for state income tax purposes, allowing or even requiring partners to file jointly for state returns. States such as California, for instance, define domestic partnerships to provide many of the same rights and responsibilities as marriage, including allowing joint filing for state income tax. This creates a dual filing requirement where partners file separately for federal taxes but jointly for state taxes, necessitating careful reconciliation of income and deductions.

Community property is a key consideration in certain states. In these states, income earned by either partner during the domestic partnership is considered equally owned by both, regardless of who earned it. This applies to Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. For federal tax purposes, even though partners file separately, those in community property states must each report half of the combined community income on their individual federal returns.

This allocation is done using IRS Form 8958, “Allocation of Tax Amounts Between Certain Individuals in Community Property States,” which must be attached to each partner’s federal return. Community property rules also extend to deductions and expenses. For example, business expenses from a community property business are split 50-50 between partners. This complex allocation can lead to situations where one partner’s federal return reflects income earned by the other, requiring meticulous record-keeping. The varying state approaches, from full recognition to no recognition, highlight the need to consult specific state tax regulations for compliance.

Navigating Shared Finances and Tax Benefits

Managing shared finances as domestic partners presents unique tax considerations, given the individual federal filing status and diverse state rules. For common deductions like mortgage interest or property taxes, the deduction must be claimed by the partner legally obligated to pay the expense or who paid it from separate funds. If a shared asset, like a home, is jointly owned and expenses are paid from a joint account, partners should ensure accurate attribution for their individual federal returns. Charitable contributions are deductible by the partner who made the contribution.

Claiming dependents can be complex. While a domestic partner cannot be the sole qualifying person for Head of Household status, one partner may claim the other as a qualifying relative dependent if specific IRS tests are met. These tests include the domestic partner’s gross income being below a certain threshold (e.g., $5,050 for 2024), the taxpayer providing more than half of the partner’s total support, and the partner living with the taxpayer for the entire year. If these conditions are met, the taxpayer may be eligible for the Credit for Other Dependents, which can provide a tax credit of up to $500.

Health insurance provided through one partner’s employer carries specific tax implications. The value of health insurance coverage for a non-dependent domestic partner is considered taxable imputed income to the employee. This means the employer’s contribution towards the domestic partner’s premium is added to the employee’s gross income and is subject to withholding and payroll taxes, appearing on the employee’s Form W-2. This imputed income is distinct from pre-tax contributions for a spouse’s coverage. An exception exists if the domestic partner qualifies as a tax dependent under IRS rules, in which case the value of the coverage may be excluded from the employee’s income.

Accurate income reporting and expense attribution are important for domestic partners, especially with shared assets or joint accounts. In community property states, income and expenses are split equally for federal tax purposes, even if only one partner earns the income. Maintaining clear financial records, such as documenting contributions to shared expenses and distinguishing between separate and community income, is vital. Due to the interplay of federal and state tax laws and shared finances, seeking professional tax advice can help ensure compliance and optimize tax outcomes.