How Unmarried Homeowners Do Taxes
by Sarah Collins
I love taxes. They let me quantify a year in spending and give me a reason to use my paperclips. But mostly it’s because this episode of The West Wing trained me to believe that taxes are my direct relationship with Josiah Bartlett.
Getting a boatload of money back also helps. I bought a house so I could adopt a dog and act out HGTV episodes, so the tax rebate was really more of a nice surprise. The only hiccup is that I am not actually married to my boyfriend and co-owner. When we were buying the house, this fact resulted in a ton of stress, confusion and paperwork for everyone involved.
Taxes are no different.
With a little help from my lovely and blue-haired accountant, though, we’ve worked out a simple two-part process that gets my partner and me the biggest rebate with the smallest amount of teeth gnashing. If you happen to be in a similar, increasingly less unusual situation, this is really all you need to do.
Decide who’s claiming the house
Sometimes this part is done for you. If one of you is deriving income from the house — think renting, working from home, or running a business from the house — that person will want to claim the home so he or she can write off the many goodies like depreciation against that income.
In our case, we both work out of the house. Instead of itemizing our deductions and writing off the maximum amount, we take the simplified option and write off $5 per square foot of office space, bringing us both to the $1,500 max.
I’ll admit that we’re probably leaving money on the table by doing this, and the notion makes my skin crawl. But once you decide who’s claiming the house, you’re pretty much stuck with that decision. On the off chance one of us transitions to a normal, respectable office life with no side hustle, we wouldn’t be able to switch the house over to the person still grinding it out at home.
This is unlikely, but a girl can dream of a guest bedroom.
Decide who’s deducting what
This step only applies if you, like us, have failed at the first step and decided to both claim the house. I was honestly disappointed by how little you can deduct once you own a house. I still say replacing the horrifying pink toilet in our bathroom qualifies as an energy-efficiency improvement and should be deductible, but my accountant tends to just look at me until I stop pursuing this thought train.
There’s still plenty left to deduct, though. Like donating that pink toilet to a reuse non-profit, along with so many other things. Plus mortgage interest and private mortgage insurance if you’re unlucky enough to have it. We were.
Our first year, all this totaled up to a few thousand dollars in deductions. Because it wasn’t income tied to one person, either of us could claim all of it, or we could both claim all of it. Since we operate on a team mentality, our accountant ran it all three ways, figured out which would net the biggest rebate, and filed it that way.
To be honest, we could certainly do this without an accountant. But I take my relationship with the government very seriously, and I crave external validation. She makes sure that I’ve made all the right piles of paperwork so I can pass the next 12 months without fear of being audited.
The only thing you must do is file together, so you can figure out what makes sense for you both individually and as a team. This is where having an accountant really proves its worth. No matter how strong the relationship, sometimes it’s worth paying someone else to be a mediator/parent/adult. Especially if one of you is extremely type A (guess who), while the other remains fairly normal and unenthused about taxes.
This year we plan to use the tax return to remove the pink bathtub.
This story is part of our Tax Month series.