The following questions and answers
provide information to individuals of the same sex and opposite sex who are in
registered domestic partnerships, civil unions or other similar formal
relationships that are not marriages under state law. These individuals
are not considered as married or spouses for federal tax purposes. For
convenience, these individuals are referred to as “registered domestic
partners” in these questions and answers. Questions and answers 9 through
27 concern registered domestic partners who reside in community property states
and who are subject to their state’s community property laws. These
questions and answers have been updated since the Supreme Court issued its
decision in United States v. Windsor. As a result of the Court’s
decision, the Service has ruled that same-sex couples who are married under
state law are married for federal tax purposes. See Revenue
Ruling 2013-17 in IRB 2013‑38 IRB.
Q1. Can registered domestic partners
file federal tax returns using a married filing jointly or married filing
separately status?
A1. No. Registered domestic
partners may not file a federal return using a married filing separately or
jointly filing status. Registered domestic partners are not married under
state law. Therefore, these taxpayers are not married for federal tax
purposes.
Q2. Can a taxpayer use the
head-of-household filing status if the taxpayer’s only dependent is his or her
registered domestic partner?
A2. No. A taxpayer cannot file
as head of household if the taxpayer’s only dependent is his or her registered
domestic partner. A taxpayer’s registered domestic partner is not one of
the specified related individuals in section 152(c) or (d) that qualifies the
taxpayer to file as head of household, even if the registered domestic partner
is the taxpayer’s dependent.
Q3. If registered domestic partners
have a child, which parent may claim the child as a dependent?
A3. If a child is a qualifying child
under section 152(c) of both parents who are registered domestic partners,
either parent, but not both, may claim a dependency deduction for the qualifying
child. If both parents claim a dependency deduction for the child on their
income tax returns, the IRS will treat the child as the qualifying child of the
parent with whom the child resides for the longer period of time during the
taxable year. If the child resides with each parent for the same amount of
time during the taxable year, the IRS will treat the child as the qualifying
child of the parent with the higher adjusted gross income.
Q4. Can a registered domestic
partner itemize deductions if his or her partner claims a standard
deduction?
A4. Yes. A registered domestic
partner may itemize or claim the standard deduction regardless of whether his
or her partner itemizes or claims the standard deduction. Although the law
prohibits a taxpayer from itemizing deductions if the taxpayer’s spouse claims
the standard deduction (section 63(c)(6)(A)), this provision does not apply to
registered domestic partners, because registered domestic partners are not
spouses for federal tax purposes.
Q5. If registered domestic partners
adopt a child together, can one or both of the registered domestic partners
qualify for the adoption credit?
A5. Yes. Each registered
domestic partner may qualify to claim the adoption credit for the amount of the
qualified adoption expenses paid for the adoption. The partners may not
both claim a credit for the same qualified adoption expenses, and the sum of
the credit taken by each registered domestic partner may not exceed the total
amount paid. The adoption credit is limited to $12,970 per child in
2013. Thus, if both registered domestic partners paid qualified adoption
expenses to adopt the same child, and the total of those expenses exceeds
$12,970, the maximum credit available for the adoption is $12,970. The
registered domestic partners may allocate this maximum between them in any way
they agree, and the amount of credit claimed by one registered domestic partner
can exceed the adoption expenses paid by that person, as long as the total
credit claimed by both registered domestic partners does not exceed the total
amount paid by them. The same rules generally apply in the case of a
special needs adoption.
Q6. If a taxpayer adopts the child
of his or her registered domestic partner as a second parent or co-parent, may
the taxpayer (“adopting parent”) claim the adoption credit for the qualifying
adoption expenses he or she pays to adopt the child?
A6. Yes. The adopting parent
may be eligible to claim an adoption credit. A taxpayer may not claim an
adoption credit for the expenses of adopting the child of the taxpayer’s spouse
(section 23) . However, this limitation does not apply to adoptions by
registered domestic partners because registered domestic partners are not
spouses for federal tax purposes.
Q7. Do provisions of the federal tax
law such as section 66 (treatment of community income) and section 469(i)(5)
($25,000 offset for passive activity losses for rental real estate activities)
that apply to married taxpayers apply to registered domestic partners?
A7. No. Like other provisions
of the federal tax law that apply only to married taxpayers, section 66 and
section 469(i)(5) do not apply to registered domestic partners because
registered domestic partners are not married for federal tax purposes.
Q8. Is a registered domestic partner
the stepparent of his or her partner’s child?
A8. If a registered domestic partner
is the stepparent of his or her partner’s child under state law, the registered
domestic partner is the stepparent of the child for federal income tax
purposes.
Publication 555, Community Property,
provides general information for taxpayers, including registered domestic
partners, who reside in community property states. The following questions
and answers provide additional information to registered domestic partners
(including same-sex and opposite-sex registered domestic partners) who reside
in community property states and are subject to community property laws.
Q9. How do registered domestic
partners determine their gross income?
A9. Registered domestic
partners must each report half the combined community income earned by the
partners. In addition to half of the community income, a partner who has
income that is not community income must report that separate income.
Q10. Can a registered domestic
partner qualify to file his or her tax return using head-of-household filing
status?
A10. Generally, to qualify as a
head-of-household, a taxpayer must provide more than half the cost of
maintaining his or her household during the taxable year, and that household
must be the principal place of abode of the taxpayer’s dependent for more than
half of the taxable year (section 2(b)). If registered domestic partners
pay all of the costs of maintaining the household from community funds, each
partner is considered to have incurred half the cost and neither can qualify as
head of household. Even if one of the partners pays more than half by
contributing separate funds, that partner cannot file as head of household if
the only dependent is his or her registered domestic partner. A taxpayer’s
registered domestic partner is not one of the specified related individuals in
section 152(c) or (d) that qualifies the taxpayer to file as head of household,
even if the partner is the taxpayer’s dependent.
Q11. Can a registered domestic
partner be a dependent of his or her partner for purposes of the dependency
deduction under section 151?
A11. A registered domestic
partner can be a dependent of his or her partner if the requirements of sections
151 and 152 are met. However, it is unlikely that registered domestic
partners will satisfy the gross income requirement of section 152(d)(1)(B) and
the support requirement of section 152(d)(1)(C). To satisfy the gross
income requirement, the gross income of the individual claimed as a dependent
must be less than the exemption amount ($3,900 for 2013). Because registered
domestic partners each report half the combined community income earned by both
partners, it is unlikely that a registered domestic partner will have gross
income that is less than the exemption amount.
To satisfy the support requirement,
more than half of an individual’s support for the year must be provided by the
person seeking the dependency deduction. If a registered domestic partner’s
(Partner A’s) support comes entirely from community funds, that partner is
considered to have provided half of his or her own support and cannot be
claimed as a dependent by another. However, if the other registered
domestic partner (Partner B) pays more than half of the support of Partner A by
contributing separate funds, Partner A may be a dependent of Partner B for
purposes of section 151, provided the other requirements of sections 151 and
152 are satisfied.
Q12. Can a registered domestic
partner be a dependent of his or her partner for purposes of the exclusion in
section 105(b) for reimbursements of expenses for medical care?
A12. A registered domestic
partner (Partner A) may be a dependent of his or her partner (Partner B) for
purposes of the exclusion in section 105(b) only if the support requirement
(discussed in Question 11, above) is satisfied. Unlike the requirements
for section 152(d) (dependency deduction for a qualifying relative), section
105(b) does not require that Partner A's gross income be less than the
exemption amount in order for Partner A to qualify as a
dependent.
Q13. How should registered
domestic partners report wages, other income items, and deductions on their
federal income tax returns?
A13. Registered domestic
partners should report wages, other income items, and deductions according to
the instructions to Form 1040, U.S. Individual Income Tax Return, and related
schedules, and Form 8958, Allocation of Tax Amounts Between Certain Individuals
in Community Property States. Form 8958 is used to determine the
allocation of tax amounts between registered domestic partners. Each
partner must complete and attach Form 8958 to his or her Form 1040.
Q14. Should registered domestic
partners report social security benefits as community income for federal tax
purposes?
A14. Generally, state law
determines whether an item of income constitutes community
income. Accordingly, if Social Security benefits are community income
under state law, then they are also community income for federal income tax
purposes. If Social Security benefits are not community income under state
law, then they are not community income for federal income tax purposes.
Q15. How should registered
domestic partners report community income from a business on Schedule C, Profit
or Loss From Business?
A15. Half of the income,
deductions, and net earnings of a business operated by a registered domestic
partner must be reported by each registered domestic partner on a Schedule C
(or Schedule C-EZ). In addition, each registered domestic partner owes
self-employment tax on half of the net earnings of the business. The
self-employment tax rule under section 1402(a)(5) that overrides community
income treatment and attributes the income, deductions, and net earnings to the
spouse who carries on the trade or business does not apply to registered
domestic partners.
Q16. Are registered domestic
partners each entitled to half of the credits for income tax withholding from
the combined wages of the registered domestic partners?
A16. Yes. Because each
registered domestic partner is taxed on half the combined community income
earned by the partners, each is entitled to a credit for half of the income tax
withheld on the combined wages.
Q17. Are registered domestic partners
each entitled to take credit for half of the total estimated tax payments paid
by the partners?
A17. No. Unlike
withholding credits, which are allowed to the person who is taxed on the income
from which the tax is withheld, a registered domestic partner can take credit
only for the estimated tax payments that he or she
made.
Q18. Are community property
laws taken into account in determining earned income for purposes of the
dependent care credit, the refundable portion of the child tax credit, the
earned income credit, and the making work pay credit?
A18. No. The federal tax
laws governing these credits specifically provide that earned income is
computed without regard to community property laws in determining the earned
income amounts described in section 21(d) (dependent care credit), section
24(d) (the refundable portion of the child tax credit), section 32(a) (earned
income credit), and section 36A(d) (making work pay credit).
Q19. Are community property
laws taken into account in determining adjusted gross income (or modified
adjusted gross income) for purposes of the dependent care credit, the child tax
credit, the earned income credit, and the making work pay credit?
A19. Yes. Community
property laws must be taken into account in determining the adjusted gross
income (or modified adjusted gross income) amounts in section 21(a) (dependent
care credit), section 24(b) (child tax credit), section 32(a) (earned income
credit), and section 36A(b) (making work pay credit).
Q20. Are amounts a registered
domestic partner receives for education expenses that cannot be excluded from
the partner’s gross income (includible education benefits) considered to be
community income?
A20. Generally, state law
determines whether an item of income constitutes community
income. Accordingly, whether includible education benefits are community
income for federal income tax purposes depends on whether they are community
income under state law. If the includible education benefits are community
income under state law, then they are community income for federal income tax
purposes. If not community income under state law, they are not community
income for federal income tax purposes.
Q21. If only one registered domestic
partner is a teacher and pays qualified out-of-pocket educator expenses from
community funds, do the registered domestic partners split the educator expense
deduction?
A21. No. Section
62(a)(2)(D) allows only eligible educators to take a deduction for qualified
out-of-pocket educator expenses. If only one registered domestic partner
is an eligible educator (the eligible partner), then only the eligible partner
may claim a section 62(a)(2)(D) deduction. If the eligible partner uses
community funds to pay educator expenses, the eligible partner may determine
the deduction as if he or she made the entire expenditure. In that case,
the eligible partner has received a gift from his or her partner equal to
one-half of the expenditure.
Q22. If a registered domestic
partner incurs indebtedness for his or her qualified education expenses or the
expenses of a dependent and pays interest on the indebtedness out of community
funds, do the registered domestic partners split the interest deduction?
A22. No. To be a qualified
education loan, the indebtedness must be incurred by a taxpayer to pay the
qualified education expenses of the taxpayer, the taxpayer’s spouse, or a
dependent of the taxpayer (section 221(d)(1)). Thus, only the partner who
incurs debt to pay his or her own education expenses or the expenses of a
dependent may deduct interest on a qualified education loan (the student
partner). If the student partner uses community funds to pay the interest
on the qualified education loan, the student partner may determine the
deduction as if he or she made the entire expenditure. In that case, the
student partner has received a gift from his or her partner equal to one-half
of the expenditure.
Q23. If registered domestic
partners pay the qualified educational expenses of one of the partners or a
dependent of one of the partners with community funds, do the registered
domestic partners split the section 25A credits (education credits)?
A23. No. Only the partner
who pays his or her own education expenses or the expenses of his or her
dependent is eligible for an education credit (the student partner). If
the student partner uses community funds to pay the education expenses, the
student partner may determine the credit as if he or she made the entire
expenditure. In that case, the student partner has received a gift from
his or her partner equal to one-half of the expenditure. Similarly, if the
student partner is allowed a deduction under section 222 (deduction for
qualified tuition and related expenses), and uses community funds to pay the
education expenses, the student partner may determine the qualified tuition
expense deduction as if he or she made the entire expenditure. In that
case, the student partner has received a gift from his or her partner equal to
one-half of the expenditure.
Q24. Are community property
laws taken into account in determining compensation for purposes of the IRA
deduction?
A24. No. The federal tax
laws governing the IRA deduction (section 219(f)(2)) specifically provide
that the maximum IRA deduction (under section 219(b)) is computed separately
for each individual, and that these IRA deduction rules are applied without
regard to any community property laws. Thus, each individual determines
whether he or she is eligible for an IRA deduction by computing his or her
individual compensation (determined without application of community property
laws).
Q25. If a registered domestic
partner is self-employed and pays health insurance premiums for both partners
out of community property funds, are both partners allowed a deduction under
section 162(l) (deduction for self-employed health insurance)?
A25. If one of the registered
domestic partners is a self-employed individual treated as an employee within
the meaning of section 401(c)(1)(the employee partner) and the other partner is
not (the non-employee partner), the employee partner may be allowed a deduction
under section 162(l) for the cost of the employee partner’s health
insurance paid out of community funds. If the non-employee partner is also
covered by the health insurance, the portion of the cost attributable to the
non-employee partner’s coverage is not deductible by either the employee
partner or the non-employee partner under section 162(l).
Q26. If a registered domestic
partner has a dependent and incurs employment-related expenses that are paid
out of community funds, how does the registered domestic partner calculate the
dependent care credit? How about the child tax credit?
A26. If a registered domestic
partner has a qualifying individual as defined in section 21(b)(1) and incurs
employment-related expenses as defined in section 21(b)(2) for the care of the
qualifying individual that are paid with community funds, the partner (employee
partner) may determine the dependent care credit as if he or she made the
entire expenditure. In that case, the employee partner has received a gift
from his or her partner equal to one-half of the expenditure. In computing
the dependent care credit, the following rules apply:
- The
employee partner must reduce the employment-related expenses by any
amounts he or she excludes from income under section 129 (exclusion for
employees for dependent care assistance furnished pursuant to a program
described in section 129(d));
- The
earned income limitation described in section 21(d) is determined without
regard to community property laws; and
- The
adjusted gross income of the employee partner is determined by taking into
account community property laws.
A child tax credit is allowed for
each qualifying child of a taxpayer for whom the taxpayer is allowed a personal
exemption deduction. Thus, if a registered domestic partner has one or
more dependents who is a qualifying child, the registered domestic partner may
be allowed a child tax credit for each qualifying child. In determining
the amount of the allowable credit, the modified adjusted gross income of the
registered domestic partner with the qualifying child is determined by taking
into account community property laws. Community property laws are ignored,
however, in determining the refundable portion of the child tax credit.
Q27. Does Rev. Proc. 2002-69,
2002-2 C.B. 831, apply to registered domestic partners?
A27. No. Rev.
Proc. 2002-69 allows spouses to classify certain entities solely
owned by the spouses as community property, as either a disregarded entity or a
partnership for federal tax purposes. Rev. Proc. 2002-69 applies only to
spouses. Because registered domestic partners are not spouses for federal
tax purposes, Rev. Proc. 2002-69 does not apply to registered domestic
partners.
Pursuant to the requirements of the Internal Revenue Service Circular 230, we
inform you that, to the extent any advice relating to a Federal tax issue is
contained in this communication, including in any attachments, it was not
written or intended to be used, and cannot be used, for the purpose of (a)
avoiding any tax related penalties that may be imposed on you or any other
person under the Internal Revenue Code, or (b) promoting, marketing or
recommending to another person any transaction or matter addressed in this
communication