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Questions and Answers for Registered Domestic Partners and Same-Sex Spouses in Community Property States

Publication 555, Community Property, provides general information for taxpayers, including registered domestic partners and same-sex spouses, 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) and same-sex spouses who are subject to their state’s community property laws (for convenience, these individuals are referred to as “registered domestic partners” in the questions and answers below).

Q. How do registered domestic partners determine their gross income?

A. 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.

Q. Can a registered domestic partner qualify to file his or her tax return using head-of-household filing status?

A. 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. 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. However, one of the partners may pay more than half by contributing separate funds. 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 related individuals described in the law that qualifies the taxpayer to file as head of household, even if the partner is the taxpayer’s dependent.

Q. Can a registered domestic partner be a dependent of his or her partner for purposes of the dependency deduction under section 151?

A. 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, an individual’s gross income must be less than the exemption amount ($3,700 for 2011). 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.

Q. 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?

A. 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 4, above) is satisfied. Unlike section 152(d), 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.

Q. How should registered domestic partners report wages, other income items, and deductions on their federal income tax returns?

A. 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. In addition, registered domestic partners should attach the Allocation Worksheet in Table 2 of Publication 555, Community Property, to their separate returns showing how the partners computed the income, deductions, and federal income tax withholding that each reported. Each partner should write the social security number of the other partner in the “Notes” section of the worksheet. If a registered domestic partner does not attach a worksheet, he or she must attach a copy of his or her partner's Form W-2 or 1099-R (in addition to his or her own) and make a notation on the form showing the division of income and tax withholding.

Q. Should registered domestic partners report social security benefits as community income for federal tax purposes?

A. 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.

Q. How should registered domestic partners report Schedule C income that is community property?

A. 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. Although the self-employment tax rules contain a provision that overrides community income treatment in the case of spouses (section 1402(a)(5) of the Internal Revenue Code), this provision does not apply to registered domestic partners.

Q. Are registered domestic partners each entitled to half of the credits for income tax withholding from the combined wages of the registered domestic partners?

A. 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.

Q. Are registered domestic partners each entitled to take credit for half of the total estimated tax payments paid by the partners?

A. 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.

Q. 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?

A. 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).

Q. 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?

A. 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).

Q. Are registered domestic partners who reported income without regard to community property laws required to amend their pre-2010 returns to each report half the combined community income of the partners?

A. Registered domestic partners who reported community income without regard to community property laws for a taxable year beginning before 2010 are generally not required to amend those returns to report half of the community income. The following rules apply for taxable years prior to 2010:

Registered domestic partners in California received full community property rights in 2007. Thus, in California, registered domestic partners may, but are not required to, amend their returns for taxable years beginning in 2007, 2008 and 2009 to report half of the community income of the partners.
In Nevada, the state’s community property laws apply to registered domestic partners as of October 1, 2009. Thus, registered domestic partners may, but are not required to, amend their returns for a taxable year beginning in 2009 to report half of the community income of the partners for the period beginning October 1, 2009, and ending on the last day of the partner’s 2009 taxable year.
In Washington, the state’s community property laws apply to registered domestic partners as of June 12, 2008. Thus, registered domestic partners may, but are not required to, amend their returns for a taxable year beginning in 2009 to report half of the community income of the partners. For 2008, the partners may, but are not required to, amend their returns to report half of the community income of the partners for the period beginning June 12, 2008, and ending on the last day of the partner’s 2008 taxable year.

In all cases, if one of the partners amends his or her return to report half of the community income, the other partner must report the other half.

Q. 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?

A. 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.

Q. 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?

A. 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.

Q. 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?

A. 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. 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.

Q. 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)?

A. 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. If the student partner is allowed a deduction under section 222 (deduction for qualified tuition and related expenses), this same rationale is used to determine the amount of the student partner’s deduction (and the amount of any gift by his or her partner).

Q. Are community property laws taken into account in determining compensation for purposes of the IRA deduction?

A. 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.

Q. 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)?

A. If one of the registered domestic partner 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).

Q. 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?

A. If a registered domestic partner has a qualifying individual (defined in section 21(b)(1)) and incurs employment-related expenses (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. 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. However, for purposes of determining the amount of the allowable dependent care credit, 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.

Q. Does Rev. Proc. 2002-69, 2002-2 C.B. 831, apply to registered domestic partners?

A. Rev. Proc. 2002-69 (classification for federal tax purposes of a qualified entity that is owned solely by a husband and wife as community property) does not apply to registered domestic partners. Registered domestic partners are not spouses for federal tax purposes so an entity owned by them is not a qualified entity as that term is defined in Rev. Proc. 2002-69.

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Page Last Reviewed or Updated: 2012-08-04