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What Is It?

There are many differences in the way the federal tax code applies to an unmarried couple as compared to a married couple. For tax purposes, you're considered to be two unrelated single people, and this has certain ramifications when it comes to planning for income and estate taxes.

Caution: Be sure to consult with your tax professional for help with your individual situation.

Income Tax Issues

Domestic Partner Health Benefits Counted As Income

When you're an unmarried couple, the value of health insurance your employer provides to your partner under a domestic partner benefit plan is taxable to you as income (unless the partner otherwise qualifies as your dependent) on the federal level (but not always on the state level). In contrast, health insurance coverage provided by your employer to your spouse generally is not taxable.


As single filers, you can't combine deductions. You also can't claim deductions for expenses that were paid by your partner. In contrast, married couples filing jointly can generally combine itemized deductions.

Gift and Estate Tax Issues

Limits on the Size of Nontaxable Estate

Everyone is entitled to the applicable exclusion amount which shelters up to a certain amount from federal gift and estate tax. If you and your partner are unmarried at the time of your death, your estate may be taxed on any amount you leave your surviving partner in excess of your applicable exclusion amount. Married couples, however, benefit from the unlimited marital deduction. As a result of this deduction, there is no limit on the size of the estate that can be left to the surviving spouse free from federal gift and estate tax.

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Taxation of Jointly Held Property

Although it avoids probate, property you share in joint tenancy with rights of survivorship (JTWROS) does not automatically escape estate taxes. When you're an unmarried couple, the entire value of property you hold jointly is included in the gross taxable estate of the first to die, unless your estate can prove the surviving partner contributed to the cost of the property. In other words, your estate must prove the property wasn't a gift. You should keep accurate records of your payments on jointly held property to verify your share of the ownership.

Transfers of Property to Your Partner

If you and your partner are unmarried, any property you transfer to your partner for less than its fair value may be considered a gift subject to federal gift and estate tax over the annual limit per donee. Ordinarily, you may think of a gift as something you give expecting nothing in return. The IRS, however, considers gifts to include uneven exchanges of property.

A married couple, however, can transfer any amount of assets to each other free from federal gift and estate tax due to the unlimited marital deduction.



This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.


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