When you get a divorce, you need to plan for the changes in your taxes. Everything about your taxation will be different, so know what to expect before it is time to file. Fortunately, it is simple to predict how you will handle your taxes since a divorce. Here is some helpful information with regard to filing your taxes after your divorce.
Do You File Single or Married?
The first thing you need to know is whether or not you should file single or married on your tax return. To figure out how you should file, consider the finalization date of your divorce.
If your divorce is final by December 31st of the year you filed, you will file your taxes as a single person. However, if you are in the divorce process and it is not final until the next calendar year, you will have to file as a married couple the current year. You will be able to file as a single person the next year, as long as your divorce is final.
If you meet the qualifications, you may be able to file as Head of Household when you are still technically married in the eyes of the Internal Revenue Service. However, do not take this step without the counsel of your attorney or your tax accountant.
Does Child Support Affect Taxes?
Whether you pay or receive child support payments, you do not have to worry about taxes when it comes to deductions or taxation.
The parent responsible for child support payments is not deductible from his or her income. The parent in receipt of child support will not have to pay taxes on the money because it is not considered taxable income.
Who Claims the Children as Dependents?
Once the divorce is final, one parent may only claim the children as dependents each year. However, you do have the option to alternate the exemptions each tax year. Typically, the child support order explains in detail how you will claim your children on your taxes and which parent will take the deduction.
However, if you are not the custodial parent and it is your turn to claim the children on your tax return, you will include a waiver signed by your former spouse which states it is your year to claim the children.
How Will Alimony or Spousal Support Change Your Taxes?
Whether you pay or receive spousal support or alimony, you must keep careful records of the transactions for tax purposes. If you pay spousal support or alimony, the money is deductible. If you receive the spousal support or alimony, you have to report the money as income on your tax return.
If you are the parent who pays the support and you want to deduct the payments, you have to pay on time each payment period. Per the recapture rules of the IRS, if you do not pay the full amount required of you, you cannot deduct the entire amount you paid.
In some circumstances, the parent who pays spousal support may also pay outside parties to support the former spouse. For example, if you are the spouse who pays the spousal support and you make the mortgage payment on the home your former spouse lives in, you may be able to deduct some of the payment amount as spousal support.
In the same example, you may also have to pay the insurance and real estate taxes on the home. You could also itemize deductions for the mortgage interest and the taxes you paid on the home.
Keep in mind your former spouse will have to include the amount of any third-party payments you make on their behalf as income on their own tax return. For example, if you make a $1,000 mortgage payment and a $50 insurance payment for your spouse each month, he or she should add $1,050 to the amount of spousal support income and report the money at tax time.
If you need assistance with tax information after a divorce, please contact The Law Office of Cicily Simms.