'My girlfriend is a tax break'

April 10, 2014: 6:59 AM ET
girlfriend tax break 3
Wes Fusco claimed his girlfriend as a dependent and received a tax break of more than $3,000.
NEW YORK (CNNMoney)

If you're in a relationship with someone who is dependent on you financially, you might be able to claim them as a tax break.

Wes Fusco, a 35-year-old from Manitowoc, Wisc., had been financially supporting his girlfriend, Danielle Wissbroeker, for more than 10 years. While she took care of their three children and earned no income, Fusco paid the bills and covered her expenses.

But Fusco had no idea that this situation would translate into a tax break until his tax preparer told him that claiming Wissbroeker as a dependent could cut his tax bill by thousands of dollars.

His tax preparer, enrolled agent Don Wollersheim, was right. Girlfriends -- and boyfriends -- can qualify as dependents as long as certain requirements are met.

Related: 13 crazy tax deductions

First, your significant other must earn less than $3,900 per year and live with you throughout the year. You must also pay for more than half of their expenses and they can't be claimed as a dependent by someone else.

If they meet those criteria, then claiming them as a dependent will result in an exemption of up to $3,900. Fusco said he qualified for the full exemption and that this tax break, along with being able to claim his children as dependents, allowed him to receive a refund of more than $8,000 each year for the 10 years he supported his girlfriend.

Fusco and Wissbroeker broke up last May, so this will be the first time in a decade that he can't claim her as a dependent.

One Orlando, Fla., woman used this same strategy, claiming her unemployed boyfriend as a dependent after supporting him for years while he hunted for a job. She also received the full $3,900 exemption.

Related: 10 tax audit red flags

But these situations are rare. It's typically difficult for a couple to qualify for this deduction because of all the requirements that need to be met -- especially the low-income threshold.

"There aren't a lot of people who really don't make [under $3,900]," said Harlan Levinson, a CPA in Los Angeles.

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It's not meant to be claimed by the ultra-rich either: the exemption begins phasing out if you earn more than $250,000 per year.

Lisa Skidmore Sexton, an enrolled agent at Accu-Rite Tax & Accounting in Carlsbad, N.M., said she prepares around 300 tax returns per year and that only one or two of those are for couples where one person can be claimed as a dependent -- typically because they stay at home with the children or are out of work.

This year, she prepared taxes for someone claiming his girlfriend as a dependent. The client works at an oil company and his girlfriend stays home with their three kids and only works small temporary jobs -- earning about $3,800 last year.

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Same-sex couples have been employing this strategy for years. Before the Defense of Marriage Act was overturned last year, same-sex couples weren't able to file jointly at the federal level because they weren't recognized as married. So one person would claim the other as a dependent if he or she stayed home with the children and earned no income, said Nanette Lee Miller, head of the LGBT practice at accounting firm Marcum LLP.

Now that married same-sex couples are recognized by the federal government, however, they no longer qualify for the deduction. But if they're not married, the same exemption can be taken -- unless the relationship violates state law.

Enrolled agent Bill Nemeth said he claimed this exemption for an unmarried same-sex couple in Georgia, where one of the men was earning under the $3,900 threshold. Prior to 2004, however, he wasn't able to claim the boyfriend as a dependent because it was against state law for unmarried people in a sexual relationship to live together.

To find out if your significant other qualifies as a tax break, you can use this tool at the IRS website.

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