Companionship, love and life…you share so much with your significant other, and if your freelance business supports both of you, there’s another thing you may be able to share with your partner: a $3,950 federal tax exemption. If you have a sweetheart who, by design or by hard luck, has the majority of their living expenses paid by you, read on to see how you can recoup some of those expenses by claiming your boyfriend or girlfriend as a dependent on your 2015 tax return.
While you may think of dependents only in terms of children, the IRS definition is much broader, encompassing “qualifying relative” dependents including live-in boyfriends and girlfriends and members of your extended family. Therefore it’s worth checking to see if your significant other meets each of the following criteria, so you can claim them as a dependent and receive a tax break.
- Cohabitating—Your significant other must live with you all year as a member of your household. Having them crash on your couch occasionally or on the weekends does not make them a “qualifying relative” dependent.
- Single—This particular tax benefit does not extend to individuals who are married (to you or someone else) or to couples who have been married to each other in the past year.
Only Your Dependent—If you are going to claim your significant other as a dependent, they cannot be claimed as a dependent by someone else, nor can they claim dependents for tax purposes.
- Citizenship—To qualify, your partner must be a U.S. citizen, resident alien, national, or a resident of Canada or Mexico.
- Low Income—The “qualifying relative” dependent exemption stipulates that the dependent’s gross income must be less than $3,950 per year. The IRS defines gross income as “all income in the form of money, property, and services that is not exempt from tax.”
- Supported By You—To be considered a dependent by the IRS, your boyfriend or girlfriend must have the majority of their living expenses (more than 50 percent) paid by you. To calculate the proportion of total living expenses you pay for the dependent you are claiming, add up the cost of items such as food, lodging, clothing, education, medical expenses, transportation and recreation that you pay for (keeping in mind that the cost of shared items must be equally divided among all household members), then calculate the percentage of your partner’s total living expenses your support represents. If the amount is greater than half of the total expenses, you likely meet the IRS requirements for this criterion.
Like any other tax exemption, you need to be sure that you have legal proof to support your dependent claim. Keep records to show that you had the same address or addresses throughout the year as well as canceled checks or receipts for household expenses and for your dependent’s personal eligible expenses such as clothing, education, out-of-pocket medical costs, or recreational activities.
While the tax advantage for having a partner who is dependent on you does not translate into a large amount of money, for many freelancers it is still significant and beneficial to pursue as just one of the many benefits of having someone special to share your life with.
Jonathan Medows is a New York City-based CPA who specializes in taxes and business issues for freelance and self-employed individuals across the country.