Quick overview

Living together changes daily money management and creates tax and legal questions that many couples miss until a big event occurs (illness, audit, move, or death). In my practice advising clients for more than 15 years, the couples who plan early — documenting shared expenses, updating beneficiary forms, and checking filing status options — avoid the most costly mistakes. Below I explain the key tax and financial areas cohabitating couples should review, practical steps to take now, and resources to check for up-to-date rules.

Why filing status matters and what you can (and can’t) do

You cannot file a federal tax return as “married filing jointly” unless you are legally married. Each partner files using one of the four standard statuses: single, head of household (if eligible), married filing separately (only if married), or qualifying widow(er) (rare and specific). See IRS Publication 501 for details (IRS.gov).

  • Filing separately as two singles means each person reports only their own income and deductions. That’s usually straightforward but can miss some tax efficiencies couples see when married.
  • Head of household is available only to someone who pays more than half the household costs and has a qualifying person (usually a dependent) living with them. This can lower taxes versus single filing, but strict tests apply (see IRS guidance on Head of Household).

Action steps:

  • Run “what-if” tax calculations for each partner’s individual return and, if applicable, consider whether filing as head of household applies to one partner.
  • Use the IRS withholding estimator and adjust W-4 forms at work if tax withholding is producing large balances due or refunds (IRS.gov withholding estimator).

(Authority: IRS — Filing Status and Publication 501: https://www.irs.gov/)

Dependents, credits, and claiming someone

You generally cannot claim your partner as a dependent. The IRS allows a person to be claimed as a qualifying relative only if they meet tests for income, support, residency, and more (IRS Publication 501). That rarely applies to a romantic partner who files their own returns and supports themselves. However, you may be able to claim real dependents (children) that you raise together — which affects Child Tax Credit, Earned Income Tax Credit (EITC), and other benefits.

Practical note: If you and your partner share childcare responsibilities, keep clear records about who paid for care, who had custody, and who claimed the child on tax returns; improper claims can trigger audits.

(Authority: IRS — Qualifying Child and Dependent rules: https://www.irs.gov/)

Health insurance, HSAs, and medical coverage

Health coverage is a major cost and tax issue for couples. Some things to check:

  • If one partner has employer coverage, determine whether adding a partner is allowed and whether it’s cost-effective compared with individual plans.
  • Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) have specific contribution and eligibility rules tied to high-deductible health plans — these change annually so check IRS limits before contributing. HSAs lower taxable income and can be used to pay qualified medical expenses.

Action steps:

  • Compare premiums, deductibles, and out-of-pocket maxes with and without adding a partner to employer coverage.
  • If eligible, maximize HSA contributions (but verify current-year limits on IRS.gov).

(Authority: IRS — HSA rules and limits: https://www.irs.gov/)

Banking, credit, and joint accounts

Decide early which accounts are joint and which remain individual. Joint checking or savings accounts simplify paying shared bills but create equal ownership rights: either owner can withdraw funds, and creditors can access jointly held assets.

Tips:

  • Keep one joint account for household bills and separate personal accounts for discretionary spending.
  • Consider written agreements for large joint purchases or when putting unequal money into property.
  • Check credit reports separately and together if you plan shared borrowing (mortgage, auto loan).

Property ownership and mortgages

How you title a home matters. Typical options are joint tenancy (with rights of survivorship) or tenants in common (distinct shares). For unmarried couples, tenancy in common lets you specify percent ownership; joint tenancy automatically transfers ownership to the surviving co-owner (but does not avoid estate tax or creditor claims).

If you buy together:

  • Agree in writing what happens if one partner leaves, cannot pay, or dies. Consider a cohabitation agreement and a property buy-sell clause.
  • For mortgages, both incomes and credit histories affect qualification and interest rates.

(See our article on contingency planning for unmarried couples: Contingency Planning for Unmarried Couples: Estate Options — https://finhelp.io/glossary/contingency-planning-for-unmarried-couples-estate-options/)

Estate planning: wills, beneficiary forms, and powers of attorney

Unmarried partners do not automatically inherit under state law the way spouses usually do. That means you should:

  • Execute a will or trust to specify who gets assets.
  • Name each other as beneficiaries on retirement accounts and life insurance if you want your partner to receive assets directly (beneficiary designations override wills for those accounts).
  • Set up durable powers of attorney for financial and health decisions and consider a HIPAA authorization so you can access medical information.

In my practice I’ve seen couples assume joint ownership is enough; without wills or beneficiary designations, family members can challenge transfers and leave partners without access to funds. For practical estate steps see our estate planning checklist (internal link: Blended Family Estate Planning: Key Considerations — https://finhelp.io/glossary/blended-family-estate-planning-key-considerations/).

(Authority: Consumer Financial Protection Bureau guidance on estate planning and legal protections: https://www.consumerfinance.gov/)

Retirement accounts and Social Security considerations

Retirement plans are individually owned. You cannot roll over a partner’s 401(k) into your IRA unless you are the named beneficiary or the plan allows distributions after death. Spousal rights that apply to married couples — such as qualified joint-and-survivor annuities or spousal rollover options — generally do not apply to unmarried partners.

Social Security spousal and survivor benefits are available only to legally married spouses (with limited exceptions for certain common-law marriages recognized by some states). If Social Security benefits will matter to your household later, plan accordingly (Social Security Administration: https://www.ssa.gov/).

Taxes when one partner is self-employed or gig-working

When one partner is self-employed, the couple must coordinate estimated tax payments, self-employment tax, and deductible business expenses. Keep separate business records and consider setting up a simple written agreement about who pays what for household costs. If you share a home office, document who claims the home-office deduction and maintain clear, contemporaneous records.

Action steps:

  • Use quarterly estimated tax payments to avoid penalties.
  • Keep a separate business bank account and accurate bookkeeping.

(Authority: IRS — Self-Employment taxes and estimated payments: https://www.irs.gov/)

Tax planning checklist for cohabitating couples (actionable)

  1. Inventory: Collect pay stubs, 1099s, W-2s, mortgage/lease, insurance, retirement statements, and beneficiary forms.
  2. Decide accounts: Choose which checking/savings and credit cards will be joint vs individual.
  3. Document sharing: Use a shared budgeting spreadsheet for household receipts and contributions.
  4. Estate basics: Create or update wills, beneficiary designations, durable powers of attorney, and healthcare proxies.
  5. Filing tests: Confirm whether either partner qualifies for head of household and review withholding on each W-4.
  6. Health and HSAs: Compare employer plans and confirm HSA eligibility and limits for the tax year.
  7. Property title: Agree and document how real estate is titled and what happens on separation or death.
  8. Hire help: Consult a tax advisor for complex situations (multi-state income, rental property, or business ownership).

Common pitfalls to avoid

  • Assuming you can file jointly or access spousal benefits without marriage.
  • Leaving no estate documents: unmarried partners who die intestate often leave partners with difficult, lengthy legal battles.
  • Mixing business and personal finances when self-employed — that complicates deductions and audits.

Example scenarios (short, practical illustrations)

  • Two mid-career partners share a home and both earn wages. They keep a joint account for rent and utilities, separate personal accounts, and each updates their W-4 to reflect shared tax goals. They executed mutually beneficial beneficiary designations.

  • One partner owns a small business. They keep business income separate, pay quarterly estimates, and document a written household-contribution agreement so tax deductions do not create confusion during tax filing or audits.

These examples reflect common cases I see in my advisory work; the right choices depend on your income mix, children, and state laws.

Where to check rules and get help

  • IRS — filing status, dependents, HSA and self-employment rules: https://www.irs.gov/
  • Social Security Administration — spousal/survivor benefits: https://www.ssa.gov/
  • Consumer Financial Protection Bureau — consumer-facing guides on money and legal protections: https://www.consumerfinance.gov/
  • For state-specific questions about common-law marriage or probate, consult your state’s statutes or a local attorney.

Also consider our FinHelp pieces on related topics:

Final notes and professional disclaimer

This guide is educational and based on current federal rules and common planning practices as of 2025. Tax and benefit rules change annually and states differ on property and inheritance law. For personalized advice about your situation, consult a licensed CPA or an attorney who knows your state’s laws. In my practice I frequently recommend clients get a simple written agreement and update beneficiary forms immediately when household circumstances change — small steps that prevent large problems later.

(Authority references: IRS.gov, SSA.gov, ConsumerFinance.gov.)