Unmarried Parents and American Taxes

Achieverjo · November 2015

My partner and I are unmarried and not really sure we ever want to be married. However, having a kid together means that one of us needs to claim them as a dependent for Federal Tax purposes.

He makes more money than I do and owns our home and other property. I just own my car lol. However, my insurance is better than his, and I'm thinking of enrolling our kid as my dependent on that regard.

What is the best way to plan for taxes? I know I won't be able to claim until 2017... But I am not sure what the best way to do this is.

Any other unmarried couples with suggestions?

AEG84 · November 2015

I think either of you is able to claim the child on your taxes (starting next* year...not sure why you wouldn't be able to claim until 2017?). But, you would need to be consistent - one of you can't claim him/her as a dependent and then have the other report childcare expenses or other child-related items. I googled and found the 2nd Q&A on this link to be helpful.

*edited for clarity...I meant starting the year the child is born

misstopsail · November 2015

You can't claim a child until they're born, so on your 2016 taxes (filed in 2017.. Probably where that came from). If I were you, I'd probably have the higher earner claim the child... But then they have to keep doing it, you can't switch around.

AEG84 · November 2015

misstopsail said:

You can't claim a child until they're born, so on your 2016 taxes (filed in 2017.. Probably where that came from). If I were you, I'd probably have the higher earner claim the child... But then they have to keep doing it, you can't switch around.

I actually don't think your bolded statement is accurate. (Disclaimer: I'm an accountant, but not a tax accountant.) In this situation, both parents share equal custody and have equal right to claim the kiddo. It wouldn't be at all misleading to claim the child where the family unit will receive the most tax benefit.

NachosAndPeaches · November 2015

Does who has the child as a dependent on taxes have to be the insurance provider? Seems like two separate things where dad can claim for taxes but you can enroll baby on your insurance?

mojomama6 · November 2015

Divorced rather than unmarried, but yeah, you can totally switch around. Rotating years is mandated in my divorce, unless child support isn't current, in which case the party owed money always claims. That's standard practice here.
In your case, always have the parent with the most benefit claim on taxes.

briterfly84 · November 2015

You can alternate years for who claims the child. My ex and I have true joint (physical and legal) custody of DD and we alternate years for who claims her on taxes. It's something we made sure to put in our divorce papers so that it was legally approved, just in case anything was ever said about it. There isn't any child support paid either way, but we share childcare expenses, so on my years to claim, I claim what he pays, and vice versa. It's a little more tricky to file, and I choose to have someone prepare them for me the years I claim her (just to be sure I cover everything I need to), but it works well for us.

cmjenkies · November 2015

1. You can alternate years, child just can't be claimed 2x in a year
2. It doesn't matter whose insurance they are on - I'm not sure about using HSAs on them though and if that affects who claims?
3. I'd go with whoever has the highest income also, more than likely.

Achieverjo · November 2015

Haha I meant 2016. Baby brain and my math skills at work lol

AmadorRose · November 2015

NachosAndPeaches said:
Does who has the child as a dependent on taxes have to be the insurance provider? Seems like two separate things where dad can claim for taxes but you can enroll baby on your insurance?

It definitely doesn't matter who carries insurance - I actually carry insurance for my step kids, but their mother claims them on her taxes.

NachosAndPeaches · November 2015

Dude TriCare is the bomb. DH got out after ten years. Seriously if we could have an option to pay monthly for TriCare we would. I think it should be offered to anybody whose been in he military. But I digress.

OP: just throwing this out there, but if this starts getting to complicated for you, have you and your SO considered getting legally married and not even telling anybody? Like literally nobody needs to know and it doesn't need to change anything, but it may make your paperwork etc easier.

AmadorRose · November 2015

@NachosAndPeaches DH joined the guard (ugh) after getting out and we'll probably do that until I'm finished with school. We'll have to pay, but not nearly as much as most people. Also, I'm paying $0 for all of my prenatal, delivery, and postnatal care. People who complain about Tricare have never had to carry their own insurance.

Achieverjo · November 2015

We might get married eventually - so I'm not ruiling it out. He's more of a traditional type (and I know e secretly wants a wedding someday). However, neither of us really wants to.

My previous marriage made me very risk adverse to losing half my stuff and being taken advantage of when it comes to sharing of chores.

For the record though, my baby-daddy is wonderful and I have no reason to think he would flip the crazy/lazy switch like my ex did. But my marital baggage is a coordinated set I just can't quit.

He's mentioned diamonds recently. But I've already told him he's not allowed to propose to me while I'm pregnant. I don't want the baby to be the reason he suddenly decides he wants to join our assets.

Baby's are hard. If we still want to be together after this... Then by all means, yes, marriage would be great. But definitely not any time soon. And eloping would not be an option, because I know he wants a traditional wedding (barf!) lol.

mrstrax · November 2015

I only know what is connected to foster care, but you can claim any child who has lived in your home more than 6 mo and 1 day (majority of the year), no matter how insurance is claimed or even who is the legal parent. However, only one person/couple can claim them - who it is can change year to year, but if someone gets claimed twice you're asking for an audit.
That said, I'd talk to a tax accountant about FSAs if you plan to use and claim them for daycare expenses.

AmadorRose · November 2015

@Achieverjo I can relate - my ex cleared our bank account while I was deployed despite his having been unemployed for 1 1/2 years before that. DH and I have a joint account simply because I make significantly more than he does, but I still have my own account with only my name on it. I put a little away each month as a cushion in case a car breaks down, etc. I trust DH, but I won't be left out to dry ever again.

Achieverjo · November 2015

We might open a joint account for the kid's college fund. But our finances are very separate.... Which further complicates the tax refund issue.

Maybe the solution is to just use the refund to stock the college fund?

AmadorRose · November 2015

Achieverjo said:
We might open a joint account for the kid's college fund. But our finances are very separate.... Which further complicates the tax refund issue.

Maybe the solution is to just use the refund to stock the college fund?

This is actually an awesome idea!

Jesse835235 · November 2015

** Lurking from May 15

I think you need to run the numbers on this one. It's helpful when a higher earner can get more deductions if they are in a higher marginal tax bracket, however, there are tax credits available for lower earners. It might be surprising what the most beneficial option is. The earned income tax credit can be pretty significant. By the lower earner having more deductions, you lower your AGI which can help you qualify. If you go this route, just make sure that you aren't getting the short end of the stick as far as expenses go.

As others said, you don't have to claim your child as a dependent for insurance purposes, but only one person can claim the tax benefits for the child in a given year (earned income tax credit, child care deduction, filing head of household, etc).

amandac12581 · November 2015

Love the idea of using the refund to stock the college fund!

NachosAndPeaches · November 2015

AmadorRose said:
@NachosAndPeaches DH joined the guard (ugh) after getting out and we'll probably do that until I'm finished with school. We'll have to pay, but not nearly as much as most people. Also, I'm paying $0 for all of my prenatal, delivery, and postnatal care. People who complain about Tricare have never had to carry their own insurance.

I ALWAYS SAID THIS. Thank you. I had zero tolerance for people complaining. Especially when you can get standard FOR FREE and all you have to pay is a small copay.

AmadorRose · November 2015

NachosAndPeaches said:

AmadorRose said:
@NachosAndPeaches DH joined the guard (ugh) after getting out and we'll probably do that until I'm finished with school. We'll have to pay, but not nearly as much as most people. Also, I'm paying $0 for all of my prenatal, delivery, and postnatal care. People who complain about Tricare have never had to carry their own insurance.
I ALWAYS SAID THIS. Thank you. I had zero tolerance for people complaining. Especially when you can get standard FOR FREE and all you have to pay is a small copay.

The people I hear whine (AD side) is because they *think* they aren't getting the treatment they deserve. I don't know why people think an MRI will magically fix their knees and back. Umhellohi your job is literally to carry heavy things over long distances, plus you're overweight and lazy. Of course you hurt, that's life. I'm a thin medic and at 24, my joints are so jacked up I have a hard time getting out of my car; of course those with more physically demanding jobs hurt.

seasidesweete · November 2015

With DD I wasn't married to baby daddy (now hubby!). We had our own separate accounts (still do) and she has a savings acct. I claimed her. I had her on my insurance to keep everything consistent and because I had flex spending that paid for daycare (kind of). Also while we got refunds you can't always count on them. It's based on credits and what you have claimed on your W2s.

kalanieileen · November 2015

For fiancé and I, we make approximately the same but I will be claiming the baby as a dependent because I am much better at saving than he is. Plus, we are basically married without the title so it's not like we don't already have a what's mine is yours sort of mentality. Don't get me wrong, our accounts are separate. I do not believe in shared banking for the two of us. But when it all boils down to it, a loving relationship, we help out when the other needs it. Also my insurance kicks his insurance ass. So baby will be on my insurance as well. It is possible to switch it up between years. One year you, then the next year your partner. But be careful, the child isn't claimed twice.

I know you already got all these answers, I just wanted to throw my two cents in there

NachosAndPeaches · November 2015

Just curious for those with separate accounts (married or not), how do you divide costs for the kids? Clothes, dispers, a babysitter, etc.

AmadorRose · November 2015

@NachosAndPeaches I'm the primary breadwinner, so I assume the majority of the costs. DH chips in with what he can, but isn't able to contribute much until he starts school in January. I'm very frugal so I actually prefer this, because if he made more he would probably be buying up a storm.

princesslockness · November 2015

NachosAndPeaches said:

Just curious for those with separate accounts (married or not), how do you divide costs for the kids? Clothes, dispers, a babysitter, etc.

Lurker from August 15, but H works as a temp, while I am salaried. My insurance covers me and Baby, while H is still able to be on his parents.
We have separate accounts for baby stuff, savings and personal fun; where we each put a certain percent each month. When an expense comes up we see whose baby account can handle it. if its something like a new pacifier we don't care, but things like a 'lot of cloth diapers' I typically pick it up as I have more in that account, and I am the one pushing for them.

Achieverjo · November 2015

NachosAndPeaches said:
Just curious for those with separate accounts (married or not), how do you divide costs for the kids? Clothes, dispers, a babysitter, etc.

This is actually my question too. My partner is really good at math and has a geeky little spreadsheet that has divided our responsibilities by percentage of income...

But it's hard to imagine how to track baby expenses that way without meticulously tracking every purchase.

NachosAndPeaches · November 2015

Achieverjo said:

NachosAndPeaches said:
Just curious for those with separate accounts (married or not), how do you divide costs for the kids? Clothes, dispers, a babysitter, etc.
This is actually my question too. My partner is really good at math and has a geeky little spreadsheet that has divided our responsibilities by percentage of income...

But it's hard to imagine how to track baby expenses that way without meticulously tracking every purchase.

Maybe you guys could agree to put x percentage of your incomes into a joint account for baby expenses? Or are you totally against shared accounts?

While it does seem silly to tally up the cost of every pacifier, everything does add up. Or would you do it like when you go with friends to eat and split things down the middle even if someone got only a salad an another person got 3 glasses of wine, just figuring it will even out eventually?

mrstrax · November 2015

I asked my MIL who used to do taxes at H&R Block - the FSA doesn't matter but anything paid over that for daycare (from a regular account) can count toward a daycare credit if you're the one to claim the child. So if your daycare costs are more than the max of your FSA, have the person who is claiming the baby be the one to pay the overage.

geminioftwo · November 2015

Gosh so much info. It's interesting to see how people do their finances. I told my husband what's his is mine and what's mine is mine when we got married. He just sends his checks where told =D> I usually balance the accounts and we only use our credit card every month and pay it off every month. This means some months we save more others we save less. We both have bad shopping habits. But we also both have an idea of our fixed bills, mortgage, mandatory savings, kids savings, church offerings etc. As far as taxes go, we file jointly but like PP said you can alternate the tax benefits. We also both have HSA's so we will have the kids go where it will have the lowest premiums. We have to reevaluate yearly. For instance my insurance was better but for a family it was $650/month in premiums. We found that with the HSA the max OOP was covered and some with the savings from the HSA premiums of $22/month. Crazy. But reevaluating is key!

AmadorRose · November 2015

@geminioftwo my parents say the same thing! Mom has her own account but dad only has their joint.

Achieverjo · November 2015

@NachosAndPeaches We're both savers, but we save/spend money in different ways. Having a combined account would be like putting two severely OCD persons in a get along shirt and telling them they have to agree on their rituals.

He usually pays when we go out to dinner or to an event, and our bills are ballparked... I take care of groceries, water and power. He takes care of the mortgage, property taxes, and other things.

I think we'll probably just have to sit down and figure out who pays what bill and make a plan that way.

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