How Do I navigate Divorce and Filing Taxes?
It is essential to consult with your tax advisor to get the best advice for your situation and location. It is an excellent idea to do this even before your divorce so that you can divide your assets in a way that is most beneficial to both you and your soon-to-be-ex. There are several things to keep in mind before and after your divorce.
When You Divorce
When your divorce is finalized will impact your filing status. If it is finalized before the last day of the tax year, you cannot file jointly. If your divorce is finalized after December 31st of the tax year, you can (but don’t have to) file jointly. Filing jointly allows you to take a higher standard deduction to lower your tax obligation.
Your Tax Filing Status
If you have children, only one spouse can claim them as dependents on their taxes. The spouse who claims the children as dependents is the only spouse who can claim head of the household status. That’s not the only requirement to be able to file as the head of household.
- You must have been single, legally separated, or divorced on the last day of the tax year for which you are filing.
- You must have lived with a qualifying dependent for more than six months of the year for which you are filing.
- You must have paid more than half of the household costs during the tax year for which you are filing. These costs can include home insurance, real estate taxes, home repairs, utilities, and food eaten in the home. If both spouses paid an equal share, then neither can file as Head of Household.
Adjust your W2 Tax Form
It is essential to adjust your paycheck withholding, or at the end of the year, you may be surprised by a hefty tax obligation. As with all tax issues, this is something about which to consult with a tax advisor.
But Can You Claim Your Children as Dependents After Divorce?
It’s important to establish this not only for your filing status but also to claim tax credits such as the earned income tax credit or the child and dependent care credit.
To claim your children as dependents, you must be the custodial parent. This means that your children spend the majority of nights during the tax year living with you and sleeping in your home. Usually, this is established in your divorce decree or child custody arrangement.
Sometimes a custodial parent will allow a noncustodial parent to claim the children on their taxes as dependents. In these situations, the custodial parent would sign one IRS Form 8332 per child. The noncustodial parent will then attach the form(s) to their tax return. This may be revoked by the custodial parent the following tax year.
Alimony and Child Support
Before January 1st, 2019, alimony or spousal support was tax-deductible to the payer and taxable to the recipient of these payments. That is no longer the case.
Child support is still considered nontaxable for the custodial parent receiving these payments. The payments are also not considered income when calculating the Earned Income Credit. Likewise, the parent paying child support may not deduct them on their taxes.
If the parent ordered to pay child support becomes delinquent, the parent who should be receiving payments can work with the Office of Child Support Enforcement, part of the US Department of Health and Human Services for Children and Families, to remedy this.
Divorce and Taxes are Complicated.
It is a stressful life event that should never be navigated alone. Have an experienced lawyer on your side. White & Associates are experienced Minnesota attorneys serving the northern Twin Cities metro area. Contact us today.