When it comes to who you can claim as a dependent on your tax return, the Internal Revenue Service (IRS) defines “relative” somewhat loosely -- that is the good news. The not-so-good news is for who you can claim are intricate in that rule and not many people can qualify. If your boyfriend or girlfriend meet the four specific criteria, then they might be your “qualifying relative”:
To qualify as your dependent, your partner must actually live with you in your home. For not even part of the year, she can’t maintain her own residence. Though “temporary” absences are okay and her address must be your address throughout all 365 days. She might be serving the military, hospitalized, incarcerated, or took an extended vacation. You should be okay as long as she returns to your home after these events and the circumstances don’t last for more than six months.
Some qualifying relatives don’t actually live with you-- well maybe you have heard about that already and that is true but there is a catch. For literal relative is where this rule is reserved for which technically your girlfriend is not. You can claim her as a dependent assuming that she meets the other qualifying rules, and she moves in with you in March but if she’s still living with you on Jan. 1 of the New Year and remains with you all throughout the year.
The reason that your partner can’t afford to live on his own and that’s why he is living with you can’t be just your objective opinion. Actual income limits are actually there. As of the 2018 tax year, he can’t earn more than $4,150. And this is not his taxable income after various tax deductions are taken but this amount is his gross income. Unearned income such as interest or dividends count toward the total but certain tax-exempt sources of income such as Supplemental Security don’t.
Paying 50% of his yearly support such as rent, food, clothing, utilities, and other “essential” expenses won’t cut it. You can’t claim him as your dependent if let’s say $600 of your monthly budget is attributable to him and he contributes his limited income of $345 a month toward paying for them-- it is because $345 represents more than 57% of his living expense. But he can still qualify if $1,000 of your budget is dedicated to his support-- you are paying $655 a month and he’s got 345 for his and that comes out to more than 65%.
Unfortunately, the show’s not yet over. What if your girlfriend’s divorce is not done yet and she is still legally married? If she’s going to qualify as your dependent, she must file with her soon-to-be-ex a separate married return, not a joint return-- if they file separately neither she nor her spouse can owe taxes. But if her intention is to claim a refund of all taxes withheld from her limited pay that’s why she’s filing jointly, then there’s an exception.
She must be a U.S. national, citizen, resident, alien, or a resident of Mexico or Canada. Of course, she is not going to be your dependent if she’s establishing residency in those countries because it might mean she is not living with you full time. Finally, aside from you, no one else can claim her as a dependent. Only one taxpayer can claim an individual as a dependent per tax year according to the Inter Revenue Code.
With this, the state law can get involved as well. In the states where you reside, your relationship with your partner must be “legal”, the IRS sad. This means that your partner must not be legally married to someone since it is illegal to covet someone’s spouse in some states. You don’t have to force yourselves to tie the knot or get into a recognized domestic partnership especially if both of you aren’t ready yet.
You might be wondering what the best option is, either to get married or not. In the 2019 tax year, the standard deduction for you and your partner if you got married and file jointly will be $24,400 and that means it hikes up. And the standard deduction for the head of the household is $6,050. And you could not get some of those other tax breaks available to taxpayers with dependents since you will lose a dependent but will gain a spouse.
Your unique personal circumstances are where all these things taxes can come down. If you are uncertain what to do, better consult a tax professional.
LLOYD J CAZES CPA