Divorce And Your Tax Return
How Will Your Divorce Affect Your Tax Return?
“In this world, nothing can be said to be certain, except death and taxes.” – Benjamin Franklin
Divorce can be an all-consuming experience, seemingly putting your life on hold until it is finalized. Not everything stops for divorce, however, and taxes are one of them. Your divorce could have a significant effect on your taxes, further compromising your financial stability at a time when you can least afford it.
Separate Or Married?
If you are not yet officially divorced before the end of the year in question, you reserve the option of filing a joint return with your soon-to-be ex-spouse. Once the decree has been finalized, you must file your return separately.
While the idea of doing anything together with your spouse may not be palatable at first glance, there may be financial benefits to filing as a married couple. A skilled family law attorney or tax lawyer can help you determine whether it is in your interest to do so.
Do You Have Children?
Issues related to children can directly affect your tax filing. For example, claiming a child as a dependent can significantly reduce taxable income for parents, making it an extremely sought-after claim around tax season.
A child has two parents, but he or she can be claimed as a dependent on only one parent’s tax return. Claiming a child as a dependent also makes a parent eligible for the child tax credit, which can net as much as $1,000, depending on the parent’s income.
If both parents claim their child as a dependent, the first to file is likely to have the claim allowed, with a second filing triggering an audit or further examination. Once it is sorted out, only one parent will be able to claim the child as a dependent.
Which Parent Can Claim The Child As A Dependent?
There is a rhyme and reason to this, allowing parents to avoid the mess that ensues when both make this claim. You need to check with your accountant or tax adviser” regarding the rules governing who can claim under federal rules.
What About Child Support?
Child support is not considered income for the recipient, and it is not able to be deducted by the payer. This differentiates it from alimony, which must be declared as income and can be deducted by the payer.
Other issues in a divorce can affect your tax filing, such as the transfer of property, the sale of your home and sorting out your retirement assets. If you are in the process of divorce, the best thing you can do is make sure you have a trusted legal professional looking out for your interests.