After a divorce, you want to prepare for the possibility of a major financial blow from the IRS. According to Reuters, filing taxes after divorce or separate can be trickier than when you were together, and may result in costly expenses.
Receiving alimony, dividing up property and other assets can lead to complications when it comes to tax forms. The biggest taxable events are not normally apart of the divorce process, but as the year progresses many of these expenses may come to pass. When doing taxes, there are several difficult questions to consider if you recently got a divorce.
First, who can claim the children as dependents? Children can result in a valuable tax deduction. In the past, divorcees had the right to specify who could claim dependency exemptions for the children on their tax forms during the divorce process.
Now, couples are not permitted to use a divorce settlement to back up their claims of dependency. Instead, parents must fill out an IRS form that is signed by the custodial parent for use by the non-custodial parent. For each depending you can deduct $3,900 from your taxable income, which will reduce your taxes significantly.
Also, parents need to determine how they will handle alimony and child support. Alimony is taxable income for the recipient. The payer can deduct alimony. Child support is not taxable to the recipient but it is not deductible either. Also, selling a marital home as a part of your divorce can result in a massive tax cost.
When divorced spouses file, they must also learn what their new filing status. Remember that your marital status at the end of the year determines how you file your tax return. This means that if you get divorce on December 31st, you are considered single, but you can still file as a couple if you are not living together but are not divorced. You will want to determine which filing is appropriate for your situation. Contact Claery & Hammond today if you want more information about the tax implications of a divorce.