Ask Me Help Desk - Bought house together but not married

My boyfriend and I purchased a home together this year so our taxes will change the next time we file. My question is, how will the filing of our taxes go since both of our names are on the house but we are not married? I'm just curious so any responses would be appreciated, thanks!

Quote:

Originally Posted by tarapaige

My boyfriend and I purchased a home together this year so our taxes will change the next time we file. My question is, how will the filing of our taxes go since both of our names are on the house but we are not married? I'm just curious so any responses would be appreciated, thanks!

If tax bill, mortgage, etc are in both names, split 50/50.

Agree with Delite.

However, in certain states, living together constitutes a common law marriage and THAT may allow you to file jointly. A call to the local court house will give you areadout on local law.

Both delite and AtlantaTaxExpert are correct, Tara... however, what I'm getting out of your question is not "HOW" will you file... individual filer or joint filer, both single people... what I hear you asking is how can/does this affect your taxes. If you aren't married, I wouldn't file jointly... and in some cases it's more beneficial to file separately even if you are married. States may have differing rules on what constitutes "marriage" and therefore who can and can't file jointly. However, when one asks a tax question, they are usually referring to the greater tax liability levied by the Federal Gov't/IRS. They are VERY clear about who can and can't file jointly regardless of living arrangement.
As far as splitting the "tax benefits" of ownership, it is 100% up to you and your boyfriend split it. Along as you both are in agreeance, and your separate returns reflect the same information in respect to that house/deductions/credits etc. you can "split" it anyway you want. For instance, let's say you make $60,000.00 a year, no kids, no dependants, minimal medical and business expenses, no catastrophes and limited charitable giving... but your boyfriend works part time making $30,000.00 is a Full Time student at an accredited school, has student loans he is currently paying, gives heavily in time and money to charity or church and pays child support and insurance for a child born out of wedlock right out of high school. In this example... YOU would benefit more by taking 100% of the housing deductions (mortgage interest, property taxes, closing costs and points) because you bring in a much higher income and as a single person no dependants... will be taxed heavily. He on the otherhand is barely scraping by with his yearly income (lower tax bracket automatically, near poverty), even though he is single... he has a dependent and expenses associated with that (deduction), interest on his student loans are deductible, and he can also deduct the extensive charitable giving dollar for dollar against his income (bringing him further down on the payscale). There is a good chance (99.99%)he will be getting back ALL he paid into taxes PLUS some just how he is... if he takes 50% of the housing deductions too... he can't get more back... you can't have 200% of 100%. Does that make sense? But, by him claiming 50% on his taxes, he removes YOUR ability to claim all of it, therefore stopping you from getting the maximum benefit possible AND there is a good chance he increased your tax liability. It's okay if you end up at ZERO tax liability at the end of the day... what you don't want, is to owe in addition to what you have already paid... and find out you didn't have to!
You can go online or buy a copy of one of those tax software programs, it walks you through everything... question by question. Plug in your numbers, then plug in his numbers, save separately... then edit each one plugging in your end of year mortgage statement (1098)... keep tweaking the amount 100/0, 50/50, 75/30 and so on for each side... if you don't have a situation as obvious as the example I gave... until you find the one that you both can maximize the benefit. If you have a tax person, take it to them... or bring them a copy of your findings and let him dig for more lesser know credits and deductions. I hope this was helpful. Let me know.

Quote:

Originally Posted by beingteri

Both delite and AtlantaTaxExpert are correct, Tara...however, what I'm getting out of your question is not "HOW" will you file...individual filer or joint filer, both single people...what I hear you asking is how can/does this affect your taxes. If you aren't married, I wouldn't file jointly...and in some cases it's more beneficial to file seperately even if you are married. States may have differing rules on what constitutes "marriage" and therefore who can and can't file jointly. However, when one asks a tax question, they are usually referring to the greater tax liability levied by the Federal Gov't/IRS. They are VERY clear about who can and can't file jointly regardless of living arrangement.
As far as splitting the "tax benefits" of ownership, it is 100% up to you and your boyfriend split it. Along as you both are in agreeance, and your seperate returns reflect the same information in respect to that house/deductions/credits etc. you can "split" it anyway you want. For instance, let's say you make $60,000.00 a year, no kids, no dependants, minimal medical and business expenses, no catastrophes and limited charitable giving...but your boyfriend works part time making $30,000.00 is a Full Time student at an accredited school, has student loans he is currently paying, gives heavily in time and money to charity or church and pays child support and insurance for a child born out of wedlock right out of highschool. In this example...YOU would benefit more by taking 100% of the housing deductions (mortgage interest, property taxes, closing costs and points) because you bring in a much higher income and as a single person no dependants...will be taxed heavily. He on the otherhand is barely scraping by with his yearly income (lower tax bracket automatically, near poverty), even though he is single...he has a dependant and expenses associated with that (deduction), interest on his student loans are deductible, and he can also deduct the extensive charitable giving dollar for dollar against his income (bringing him further down on the payscale). There is a good chance (99.99%)he will be getting back ALL he paid into taxes PLUS some just how he is...if he takes 50% of the housing deductions too...he can't get more back...you can't have 200% of 100%. Does that make sense? But, by him claiming 50% on his taxes, he removes YOUR ability to claim all of it, therefore stopping you from getting the maximum benefit possible AND there is a good chance he increased your tax liability. It's okay if you end up at ZERO tax liability at the end of the day...what you don't want, is to owe in addition to what you have already paid...and find out you didn't have to!
You can go online or buy a copy of one of those tax software programs, it walks you through everything...question by question. Plug in your numbers, then plug in his numbers, save seperately...then edit each one plugging in your end of year mortgage statement (1098)...keep tweaking the amount 100/0, 50/50, 75/30 and so on for each side...if you don't have a situation as obvious as the example I gave...until you find the one that you both can maximize the benefit. If you have a tax person, take it to them...or bring them a copy of your findings and let him dig for more lesser know credits and deductions. I hope this was helpful. Let me know.

Thank you, that really does help a lot! My boyfriend makes less than me and is still in college so he should get almost all of his money back because of his student loans. However, the only deduction I will receive is from the interest that I have paid in my student loan payments, therefore I won't get as much back. I'm sure it will be more beneficial for me to claim a larger percent of the house so we will do that when the time comes and figure out the exact percentage split that would be best. Thanks again!

beingteri,

I really don't mean to be critical but I have some concerns with your comment. Two points seem important:

First, ATE mentioned about the common law filing status. This is not just a state issue. The Federal law relies on state law for determining marital status. Thus, ATE is quite correct in his comment.

Second, it might sound good to split the deductions in the most tax beneficial way, but there needs to be some support for the breakdown that is selected. If they are equally responsible for the mortgage, then they need to split the interest equally. If one person pays another person's expense, there is no deduction for that (it is a gift). Thus it is not really appropriate to simply pick between 100/0, 75/25 etc.