How does combining savings account with your partner affect your taxes?

[twillyborder]

Wanting to move money from partners savings account to mine to draw higher interest earnings.

[Bsch4477]

Your partner would be making a gift to you. If that amount is over $17,000 it requires reporting on form 709. There is no tax liability due to the generous lifetime gift tax exemption. Tax on any income would be paid by the owner of the account. Why not have partner open their own higher paying savings account?

[Mike9241]

what do you mean by partner? 

• Married same-sex couples will be able to make gifts to each other without incurring gift tax. The recipient spouse will then generally take the donor spouse’s tax basis in the property received. And they’ll qualify for gift splitting, where each spouse is treated as gifting one-half of the property gifted by the other.

special rules apply when spouses are not U.S. citizens. otherwise, gifts between spouses do not need to be reported.  from 709 instructions page 8

[rjs]

Any money that your partner puts into your account becomes your money, period. It no longer belongs to your partner. If that's not what you intend, you should keep your accounts separate.

Also note that any interest that is earned in your account belongs to you, and you have to report the interest income on your tax return and pay tax on it.

The situation might be different if you and your partner are married to each other and live in a community property state. But people do not usually refer to a spouse as a partner, so I assume you are not married unless you tell us otherwise.

[Opus 17]

I can’t emphasize this last point enough. If you are not married, and your partner puts money in your bank account, that is a gift to you. It becomes your money forever, and your partner no longer has any rights to that money.  Any interest earned by the money belongs to you and you are solely responsible for the taxes.  Presumably, you plan to give the money back to your partner, and give your partner some or all of the interest. But there would be no legal requirement that you do so.  This is more of a warning to your partner, that if you were to have a bad break up, your partner might have great difficulty in getting the money back if you were not willing to do it voluntarily.

Also, be aware that if you were to try to get around the gift problem by declaring that this money is a loan, the IRS will require that you pay interest to your partner at the federally required minimum rate or higher. The federal minimum rate is variable and is currently around 6%.  Your partner would be required to report taxable income equal to the interest that you should have paid using the federal minimum rate, even if you didn’t actually pay interest.  That creates a situation where you receive interest from the bank, that you pay tax on, and then you must pay interest to your partner that your partner pays tax on.