How Do I File My Taxes During A Divorce?
If you’re going through a divorce, chances are that taxes are one of the last things on your mind. Your new filing status after a split can be confusing, from who can claim your children as a tax exemption, and to how payments to an ex-spouse are handled for tax purposes. At Schulz Stephenson Law, we walk couples who are splitting up through the process of dividing every asset, helping you learn how to file as individuals. In conjunction with our legal guidance, we will often recommend that you also have a consultation with a tax advisor such as a CPA to discuss tax issues in more detail.
How Should I File?
Couples who are in the process of a divorce that is not yet finalized have the option of filing a joint return, or to file as married, filing separately. In the year that your divorce becomes final, you may lose the joint return option. You have the option of filing as head of household, receiving the benefit of the larger standard deduction and a gentler tax bracket, only if you’re divorced by year end, you had a dependent living under your roof for the majority of the year, and you paid for more than half the upkeep of your home.
Who Can Claim The Children?
You may continue to claim your kids as dependents if the children lived with you for the majority of the year as compared to your ex-spouse, making you the custodial parent.
In some cases, the custodial parent can sign a waiver pledging that he or she won’t claim the child, allowing the non-custodial parent to claim the exemption. In this case, the custodial parent can still claim childcare credit for work-related expenses incurred for children less than 13 years of age, even if you chose not to claim the exemption.
How Do Alimony Expenses Affect My Taxes?
If you’re the ex-spouse who is making alimony payments, they are normally tax deductible even if you don’t itemize your deductions. However, the IRS will probably only consider the payments to be alimony if they are made in cash (including checks and money orders) and clearly spelled out in the divorce agreement.
The ex-spouse who is collecting alimony payments must pay income tax on those amounts received. In regard to child support payments, the payer doesn’t get a deduction, and the recipient doesn’t pay income tax.
What else do I need to know?
Talk to your divorce lawyer about your proposed asset transfers, home sales, and transfer of retirement assets from the divorce, and then discuss these issues with your CPA or tax advisor, before it is time to file your taxes. You may be able to avoid or reduce taxes on a substantial portion of the sale of your home with a careful look at your taxes and assets of divorce.
Schulz Stephenson Law represents clients regarding Family Law, Domestic, and Divorce matters in Carteret County, NC including Beaufort, Morehead City, Atlantic Beach, Cape Carteret, and Emerald Isle as well as New Bern and other areas in Craven County, Pamlico County and surrounding areas. Contact us today for a consultation so we can discuss the next steps in your child support matter.