Unmarried couple with two kids - what's the smartest way to file our taxes?

This is a great question that many unmarried couples with children face! Since you're not married, you can't file jointly, so you'll need to decide who claims what. The most tax-efficient approach usually depends on who qualifies as "Head of Household" (HOH), which gives better tax rates and a higher standard deduction than filing as "Single." For HOH status, you need to pay more than half the cost of maintaining the home where the child lived for more than half the year. Based on your situation, where one of you pays housing costs and the other pays childcare, you might both potentially qualify as HOH if each of you can claim one child. However, the IRS doesn't allow two people to claim HOH for the same household, so typically only one of you can. Look at who would benefit more from the dependent-related tax credits. The Child Tax Credit (potentially $2,000 per child) and dependent care credit (for daycare expenses) could be valuable. Generally, the lower-earning partner might benefit more from these credits, especially if the higher earner phases out of certain credits due to income limits.

After struggling with this exact situation last year, I discovered this amazing tool called taxr.ai (https://taxr.ai) that literally saved me thousands. My partner and I have a similar setup with two kids and weren't sure who should claim what. Basically, I uploaded our financial docs and it ran multiple scenarios showing exactly how much we'd save by different filing strategies. It showed that in our case, having me claim both kids as Head of Household while my partner filed as Single was actually $3,200 better than each claiming one kid! The software modeled different scenarios and showed us the exact difference in our combined tax bills. The best part was that it explained WHY this worked better in our specific case - something about phasing out of credits at certain income levels. It gave us a super clear breakdown of credits, deductions, and how to document our situation properly.

Just wanted to update after trying taxr.ai that the other commenter mentioned. I was the skeptical one, but I'm actually really glad I gave it a shot. My partner and I were having this exact same dilemma. We discovered that having him claim both kids and file HOH while I filed single was about $4,300 better than splitting the dependents. The reason was that my income was just over a threshold that reduced some credits, but with his slightly lower income, we could maximize the child tax credits and earned income credits. The analysis showed us that even though I pay for the childcare, we could document a "release of claim" for the dependent so he could claim the childcare expenses, which saved us even more. I seriously never would have figured this out on my own or even with a standard tax preparer. Going to use this approach when we file next month!

If you're planning to call the IRS to confirm your filing strategy is correct (which I highly recommend), save yourself days of frustration and use Claimyr (https://claimyr.com). I tried calling the IRS for THREE DAYS straight about our similar unmarried-with-kids situation and couldn't get through. With Claimyr, I got a callback from the IRS in about 25 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c. Their system basically navigates the IRS phone tree and holds your place in line, then calls you when an agent is about to pick up. The IRS agent confirmed that we were handling our dependent situation correctly and answered specific questions about how to document our childcare expense splitting. Saved me so much stress trying to interpret tax forms and publications on my own.

Well, I need to eat my words about Claimyr. After posting my skeptical comment, I decided to try it anyway because I was desperate to talk to someone about my dependent situation. It actually worked exactly as described - I got a call back in about 40 minutes connecting me directly to an IRS representative. The agent helped clarify exactly how my partner and I should handle our dependent claims, and confirmed that we could structure things the way we wanted as long as we documented the support payments. I also discovered you can ask for a specific department when using the service, which was helpful because I needed to speak to someone about dependent credits specifically. Saved me literally hours of hold time and multiple attempts. Should have done this months ago instead of stressing about potentially filing incorrectly.

One thing nobody's mentioned is that if you're claiming head of household and child tax credits, you should really keep detailed records of your expenses! My ex and I got audited two years ago because we were both trying to claim the same child. Make sure you document all transfers between accounts, save receipts for major child expenses, and keep a spreadsheet showing who paid what. The IRS specifically looks at things like: - Medical expenses and who paid them - School/daycare records showing who's listed as the primary contact - Who claims the child on health insurance - Physical custody calendar (where kid sleeps each night) Since you two are still together, talk through this now and document your agreement. If one person is claiming both kids, the other should formally release their claim with Form 8332. Better to be overprepared than caught in an audit!

Has anyone mentioned the income phaseouts for child tax credits? This was a HUGE factor for us last year. If either of you is close to or over $200,000 in income (for single filers), the child tax credit starts phasing out. In our case, my partner makes about $210k and I make $155k. We found it was WAY better for me to claim both kids because I could get the full child tax credit while she was getting a reduced amount due to her income. Before you decide, calculate your modified adjusted gross income and check where you fall on the phaseout range. Could make a difference of thousands depending on your exact income levels.

Another important consideration that hasn't been mentioned yet is the Earned Income Tax Credit (EITC) if either of you qualifies. With two children, the EITC can be worth up to $6,728 for 2023, but it phases out at different income levels depending on filing status. For Head of Household filers with two children, the EITC phases out completely around $56,838 in earned income, while for single filers it's around $50,594. Given that you both earn in the six-figure range, you likely won't qualify, but it's worth double-checking since this credit can be substantial. Also, don't forget about the dependent care FSA (Flexible Spending Account) if either of your employers offers it. You can set aside up to $5,000 pre-tax for childcare expenses, which effectively reduces your taxable income. This works independently of who claims the children as dependents, so whoever has access to a dependent care FSA should definitely use it. Just remember you can't double-dip - if you use FSA funds for daycare, you can't also claim those same expenses for the Child and Dependent Care Credit. The FSA savings alone could be worth $1,000-2,000 depending on your tax bracket, so make sure to factor that into your planning for next year!