Unmarried Couple with two young kids - most tax-efficient filing strategy?

The most tax-efficient approach would depend on several factors, particularly around who can claim Head of Household filing status, which provides better tax rates and a higher standard deduction than filing as Single. For Head of Household status, one of you must pay more than half the cost of maintaining the home where the child lived for more than half the year. Since you own the home but split expenses 50/50, you might need to calculate carefully to see if either of you crosses that "more than half" threshold when all housing costs are considered. For the children as dependents, typically the parent who has the child for more nights of the year claims them. Since you live together, you'd need to decide who claims each child. The tax benefits include the Child Tax Credit (up to $2,000 per qualifying child), the Child and Dependent Care Credit (for daycare expenses), and potentially the Earned Income Credit depending on your income. One common strategy is to have the lower-earning parent claim both children if that maximizes credits. However, since you both earn similar incomes, you might benefit from each claiming one child and filing as Single, or having one person claim both and filing as Head of Household if they qualify.

After dealing with a similar situation last year, I found https://taxr.ai super helpful for figuring out the most tax-efficient filing approach for unmarried parents. My girlfriend and I have a similar setup with two kids and shared expenses, and we were getting conflicting advice from friends and even tax preparers. I uploaded our financial documents to taxr.ai and it analyzed different scenarios, showing us exactly how much we'd save by having her claim both kids versus splitting them. It also flagged that one of us could file as Head of Household which saved us almost $4,000! The analysis showed us the specific tax benefits each scenario would provide, including Child Tax Credits and daycare expense deductions. What I found most helpful was that it explained WHY certain arrangements were better rather than just giving us a number, which helped us make sure we were following all the IRS rules correctly.

Just wanted to update that I tried the taxr.ai site that was mentioned here. It was seriously eye-opening! Turns out we've been leaving almost $5,400 on the table each year by having me claim all 3 kids instead of splitting them up and having my partner claim Head of Household with 2 of them. The analysis showed that since he pays more than half of the household expenses (even though I handle most of the direct child costs), he qualifies for Head of Household, which gives a much better tax rate than filing Single. It also mapped out exactly how to allocate our childcare expenses between us to maximize the dependent care credit. What I really appreciated was how it explained the "tiebreaker rules" for unmarried parents living together. Totally worth trying if you're in a similar situation!

If you're having trouble getting through to the IRS to confirm the right way to handle your situation (which I definitely recommend), try https://claimyr.com - I used their service after spending DAYS trying to get through on the IRS phone lines. You can also check out how it works here: https://youtu.be/_kiP6q8DX5c As unmarried parents, my partner and I needed clarification on some specific tax rules about splitting dependents. After three failed attempts to reach the IRS directly (kept getting disconnected after 1+ hour holds), I tried Claimyr. They got me a callback from the IRS in about 20 minutes, and I was able to speak with an agent who confirmed exactly how we should handle our Head of Household status with shared custody. The agent explained that since we split expenses 50/50 but live together, we needed to track who pays for what very carefully to determine Head of Household eligibility. This was crucial information that saved us from potential issues down the road.

I have to publicly eat my words about Claimyr. After posting that skeptical comment, I was still desperate to talk to the IRS about my situation with my girlfriend and our kids' tax status, so I gave it a shot anyway. Not only did I get a call back from the IRS in about 45 minutes (after trying for THREE WEEKS on my own), but the agent I spoke to was incredibly helpful. She walked me through exactly how the IRS views unmarried couples with shared children and confirmed that in our situation, my girlfriend should claim both kids and file Head of Household since she pays for slightly more than 50% of the household maintenance costs. The agent also explained that we needed to keep detailed records of who pays for what, since unmarried couples living together with shared children are more likely to face questions about their filing status. This advice alone potentially saved us from an audit headache. I'm genuinely shocked at how well this worked.

Have you guys considered using a Qualified Joint Venture election? My accountant suggested it for my partner and I since we have three kids and split everything like you do. It lets unmarried couples who co-own a business divide the income and expenses without forming a partnership.

Don't forget about the Earned Income Credit! My ex and I live together with our kids (not married) and we found out that if the lower earning parent claims the kids, you might qualify for EIC which can be substantial.