Mortgages
When it comes to mortgages, the best way to save money on your taxes is to plan in advance which person should take the mortgage out. If you are making $45,000 a year and your partner is making $150,000, it makes more sense for your partner to take out the mortgage. This is because the higher income-earning partner can then claim the mortgage interest deduction over the years, and save more due to being in a higher tax bracket.
LGBT Friendly Help
Ask friends, family, and community members if they know of a tax professional that specializes in LGBT taxes. When it comes to taxes for unmarried couples, you can use all the advice you can get! Most tax professionals will be able to help you to some extent, but having a specialist in your area ensures you are doing all you can to make your taxes as low as possible. It also improves your chances of taking advantage of any benefit you do get.
Gift Tax Exclusion
A married couple has the great benefit of being able to give gifts to each other without having to pay gift or estate taxes. Unfortunately, couples within the LGBT community cannot do the same. There is however, the annual gift tax exclusion, which when used properly, can make up for some of this injustice. The annual gift tax exclusion allows you to gift $11,000 worth of assets without paying taxes on them.
Charity Contributions
Charitable contributions can greatly help you reduce your tax liability. Much like the mortgage interest, you are going to want the partner with the highest income making your charitable contributions'and getting to claim the resulting deduction.
Be Prepared for Anything
When living with a partner that you cannot legally marry, it is important that you are both vigilante when it comes to your finances. No one wants to think it, but if your relationship ends, you are not protected the same way as a married couple is for purposes of dividing assets. If there is no agreement governing the relationship, asset ownership is pretty much going to come down to who bought or funded what. This may not seem fair, as you may have made purchases based upon who benefited most, taxes-wise. When you begin building up many valuable assets, hiring a lawyer to draw up documents is smart. Consider entering a cohabitation agreement to govern your finances during the relationship and providing the framework for splitting assets if your relationship goes sour.
Asset Shifting
You should also consider moving assets between you and your spouse to save on interest. Since you have the lower income ($45,000), you will want to shift more income-earning assets towards yourself. This way, you will be taxed at a lower rate on the income earned than your partner ($150,000) would. The ability to asset shift is actually a huge benefit when compared to married couples, who cannot asset shift if filing jointly.
Inheritance Taxes
If you and your partner are registered civil partners and your partner passes away, you do not have to pay inheritance taxes at all. However, if your state does not recognize registered civil partners, your partner may, in fact, be subject to estate taxes before the bequest.
Separate Accounts
Separate accounts will simplify financial management for you and your partner. You may also consider three accounts'one account for yourself, one for your partner, and one joint account. Use your separate accounts to pay individual bills and taxes from. Also, use the separate accounts to deposit your income into. Then, each of you can fund the joint account to pay shared expenses (e.g. groceries, trips, etc.).
About the Author:
The Tax Lady Roni Deutch and her law firm Roni Lynn Deutch, A Professional Tax Corporation have been helping taxpayers across the nation find IRS tax relief for over seventeen years. The firm has experienced IRS tax attorney who will fight the IRS on your behalf.
