Most people claimed as dependents on tax returns are children or other relatives. But what you may not know is that under certain circumstances you can also claim someone as a dependent even if you're not related, as is the case with a domestic partner.
Why dependents matter
Once you identify someone as a dependent on your tax return, you're announcing to the IRS that you are financially responsible for another person. For tax years prior to 2018, taxpayers were allowed to reduce their taxable income by a certain amount for each dependent claimed on a tax return. This is known as an exemption deduction. Beginning in 2018, the exemption deduction goes away and is replaced by a dependent credit.
For 2020, the dependent credit for other than qualifying children is $500. A credit is different that a deduction in that the credit directly reduces your tax while a deduction reduces the amount of income that is subject to tax.
Several tests apply
You can claim your partner as a dependent if your situation meets all of the following conditions:
- No one else, such as your partner's parents, can claim your partner as a dependent child on their tax return
- Your partner must be a U.S. citizen, a U.S. national, a U.S. resident alien, or a resident of Canada or Mexico also might qualify
- Your partner must live with you all year
- Your partner's gross income for the year—meaning income from all sources—cannot exceed $4,300 for 2020
- You must provide more than half of your partner's financial support during the year
- Your partner cannot be married to someone else and file a joint return with that other person except to claim a refund of withheld income tax or estimated income tax paid
Income limit poses challenge
Tax expert Jonathan Weber, stresses that it can be difficult for a non-relative to meet all of the conditions necessary to be claimed as a dependent. "Most people don't realize just how many qualifiers a non-relative has to pass," he says.
The income limit is an especially tough hurdle. In most cases, Weber says, "even a part-time or seasonal job will put their income over the 2020 $4,300 limit." Working just 10 hours a week at $9 an hour, for example, would bring in more money than allowed.
Remember that your partner must live with you for the entire year to qualify as a dependent. If you moved in together in the middle of the year, you’ll have to wait until the next year before claiming your partner as a dependent.
On another matter related to living arrangements, certain "temporary absences" don't affect whether you and your partner would be considered living together. If one of you took a vacation, for example, or was deployed with the military, you would still be considered living together. The IRS says the following types of absences will not count against you:
- Illness, such as time spent in a hospital or rehabilitation facility
- Business travel or assignments
- Education-related absences
- Absences for military service