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It’s tax time again and this causes a lot of stress for some. Most of us are looking for ways to save at tax time and get a great refund. If you are unmarried and co-habitating with your partner you are probably looking for tax tips for domestic partners. Here are tips that will help save you and your partner some money at tax time.
Tax Tips For Domestic Partners
1. The first of the tax tips for domestic partners has to do with mortgages. If you are planning on buying a house together and one of you is in a much higher tax bracket than the other, it is the one in the higher tax bracket that should take the mortgage out. This is because you want whoever is in the higher tax bracket to claim the interest on the mortgage. This will yield much larger savings than if the mortgage was joint or the partner in the lower tax bracket held the mortgage.
2. The next in tax tips for domestic partners is about investment income and your tax deductions. Any investments should be under the partner in the lower income tax bracket. This will allow these investments to be taxed at a lower rate and therefore save you more money. The opposite is the case with your deductions. Have the partner in the higher income bracket claim deductions such as property taxes and charitable contributions. Again, this results in more money back on the dollar for those deductions.
3. This tip on health insurance benefits applies to same sex partners. Your health insurance benefits are tax deductible for the partner who holds them, but not for a same sex partner under the coverage. In a same sex partnership where both people work, you should each maintain separate benefits. If one of you doesn’t work, than you should consider getting an individual policy. This way you both can deduct your own health insurance policy expenses.
4. It is good practice to keep separate bank accounts. This seems odd, since most people who are partners end up with joint accounts. Here is the catch. To apply for a deduction you will need to prove that you actually paid for that expense yourself. In the event of an audit where joint accounts have been used, it can not be proven who actually paid for the expense. So it makes better sense to hold separate accounts. Use these accounts to pay for your expenses that you will deduct at tax time. This way there is no confusion as to who actually paid them.
5. If your partner does not work you can claim him or her as a dependent for an extra exemption. To do so your partner must have been living with you for a year, have income less than the personal exemption amount and receive at least 50 per cent of their total financial support from you.
We all want to ease the stress of filing our taxes. These tax tips for domestic partners are a good start, but always consult a professional before filing.
Bonus Tax Tip
If you or your partner start an online home business in your spare time you can deduct mortgage expenses, utility expenses, internet and computer expenses, home office expenses and so much more. Home business owners always get the best refunds. With just a few hours a week put into an online home business, you can receive incredible savings at tax time, not to mention a great income potential.
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