Quick overview
Unmarried partners who live together must treat housing-related tax matters differently than married taxpayers. Key issues include who appears on the title and mortgage, who actually paid certain expenses, whether partners itemize, and how any rental income or profit on sale is reported. Federal tax rules generally follow legal ownership and who paid the expense, and many benefits married couples take for granted (joint filing, certain exemptions) do not apply to unmarried cohabitants (IRS publications: Publication 530, Publication 523).
Ownership and who claims deductions
- Mortgage interest: Only the taxpayer who is legally liable for the mortgage and who actually paid the interest can claim the home mortgage interest deduction, assuming they itemize. If both partners are on the mortgage and each paid part of the interest, they can split the deduction proportional to their payments. See the detailed rules at FinHelp’s glossary on Home Mortgage Interest Deduction.
- Property taxes: The deduction for state and local taxes (SALT) is limited to $10,000 for individuals and married couples filing jointly at the federal level; only the person who actually paid the property tax and who itemizes may claim it (IRS guidance; also explained in our article Understanding Mortgage Escrow Accounts and Property Taxes).
- Title versus contribution: Legal title matters. If one partner holds title, that partner is treated as the owner for federal tax purposes unless there is clear evidence showing equitable ownership (e.g., written co-ownership agreement, traced payments). In my practice I’ve seen oral agreements fail to protect the non-titled partner when tax audits or property disputes arise.
Filing status and limits
- Federal filing: Unmarried partners cannot file a joint federal income tax return. Each partner files individually. Some states recognize domestic partnerships or civil unions and may allow different state filing treatments — check your state rules and consult a tax professional before assuming parity with married filing status.
- Itemizing vs standard deduction: Mortgage interest and property tax deductions are available only if you itemize. For many taxpayers the standard deduction exceeds itemized deductions, which can change the value of claiming those housing-related tax items.
Selling the home: capital gains exclusion
- Primary residence exclusion: A single taxpayer can exclude up to $250,000 of capital gain on the sale of a primary home if they meet the ownership and use tests; unmarried partners who both meet the tests may each exclude up to $250,000 (totaling $500,000) even if they are not married, but only if each partner individually satisfies the IRS’s ownership and use requirements. See IRS Publication 523 for the tests and exceptions.
- Practical note: For the exclusion to be available to both partners, each must meet the ownership test (owned the home for at least 2 of the 5 years before sale) and the use test (used it as a principal residence for at least 2 of the last 5 years). If one partner fails the test, that partner cannot claim the exclusion.
Rental income, subletting, and roommates
- Reporting rental income: If partners receive rental income (for example, subletting a room or renting out part of the residence), the person who receives the income must report it. Shared rental arrangements where both partners receive payments should be reported according to the share each receives. See IRS Publication 527 for residential rental rules.
- Deductions against rental income: Expenses that are ordinary and necessary to generate rental income (a share of utilities, maintenance, depreciation) can be deducted by the person who reports the rental income. Keep clear records and consider a written agreement assigning duties and income shares.
Community property states and special rules
- Community property states: In community property states (for example, California, Texas), income and some property acquired during a recognized marriage are treated as community property. These rules generally apply to married couples, not cohabiting unmarried partners. However, in a dispute over who paid what, local property and contract law can influence tax consequences — consult a state-licensed tax attorney.
Record-keeping and documentation (best practices)
- Keep a ledger: Track who paid mortgage, property tax, insurance, utilities, repairs, and improvements. Save bank records, canceled checks, and payment confirmations. Good records make it straightforward to allocate deductions properly and protect both partners if the relationship ends.
- Co-ownership agreement: A written agreement should state ownership percentages, who is responsible for mortgage payments, how sale proceeds are split, and how tax items are claimed. In my experience, a simple co-ownership or occupancy agreement reduces later litigation and clarifies tax reporting responsibilities for both partners.
Common scenarios and how to handle them
- Both partners on title and mortgage: Each partner should document their actual financial contribution. If both itemize, divide mortgage interest and property tax deductions by contribution percentages.
- One partner on title, but both pay: Payments alone don’t create ownership for tax purposes. If the non-titled partner wants claim rights, consider changing title or formalizing a loan/co-ownership arrangement and documenting contributions.
- Renting a room: The partner collecting rent reports income and may deduct related expenses. If both share rent receipts or the landlord relationship is formalized, treat income and expenses according to the allocation in your records.
Practical tax-saving strategies (professional tips)
- Evaluate the standard deduction: Each partner should run the math separately to see if itemizing makes sense. If neither partner benefits from itemizing, mortgage interest and property tax payments may offer limited federal tax value.
- Use a co-ownership agreement: Clarify ownership percentages, payment responsibilities, and tax allocation. This reduces uncertainty during audits or when selling the home.
- Consider title changes carefully: Adding a partner to title or mortgage has legal and tax consequences (gift tax, mortgage qualification). Discuss implications with a tax advisor and an attorney before making changes.
- Allocate capital improvements properly: Keep receipts and document who paid for improvements; adjustments to basis matter when calculating capital gain on sale.
- Report rental income correctly: If you sublet or take on short-term rentals (Airbnb), report gross income and claim allowable expenses; failure to report can trigger penalties (see IRS Pub. 527 and state tax rules).
Examples from practice
- Example A — Joint owners who split mortgage payments: Alex and Jordan each appear on title and the mortgage. They kept a payment log and split the mortgage interest deduction by actual payments. By itemizing, each claimed their share and avoided an ownership dispute at sale.
- Example B — One owner, one non-owner contributor: Sam paid mortgage payments to help Pat (the sole owner) but never got on title. After a separation, Sam had limited tax claims and no legal share of sale proceeds. A written co-ownership agreement would have protected Sam’s tax position and financial interest.
Mistakes to avoid
- Don’t assume joint benefits: Being in a long-term relationship does not create joint filing or automatic shared tax benefits.
- Don’t ignore the standard deduction calculation: If the standard deduction is larger than itemized deductions, claiming mortgage interest may not help.
- Don’t forget state rules: State tax treatment and recognition of domestic partnerships vary. Check state-level guidance or consult a CPA in your state.
Checklist before filing
- Who is on title and mortgage? Confirm legal ownership.
- Who actually paid mortgage interest, property taxes, insurance, and repairs? Gather proof.
- Are either partner itemizing? Run both itemized and standard deduction calculations.
- Any rental income? Confirm who received it and whether it’s reported.
- Is there a co-ownership agreement? If not, consider drafting one.
Authoritative sources and further reading
- IRS, Publication 530, Tax Information for Homeowners: https://www.irs.gov/publications/p530
- IRS, Publication 523, Selling Your Home (capital gains exclusion): https://www.irs.gov/publications/p523
- IRS, Publication 527, Residential Rental Property: https://www.irs.gov/publications/p527
- Consumer Financial Protection Bureau, mortgage disclosures and homeowner guidance: https://www.consumerfinance.gov
- FinHelp related articles: Home Mortgage Interest Deduction, Understanding Mortgage Escrow Accounts and Property Taxes, and How Cohabiting Couples Can Organize Finances and Taxes.
Professional disclaimer
This article is for educational purposes and reflects general tax rules current as of 2025. It is not individualized tax, legal, or financial advice. For decisions that affect your taxes or property rights, consult a qualified tax professional or attorney familiar with federal and state law.
