Getting divorced? Amid all the upheaval, taxes are not likely to be foremost on your mind. Yet overlooking the tax consequences can be costly.
Here are some of the basics to keep in mind:
Your filing status will change. No matter if you get your final divorce decree or separate maintenance on January 1, December 31, or any date in between, as a calendar-year taxpayer, you’re considered unmarried for the whole tax year. That means you can only file as single, head of household (if you otherwise qualify), or qualifying widow(er).
Not all payments or receipts are taxable. You can deduct alimony paid to a spouse or former spouse under a divorce or separation decree, whether or not you itemize deductions. However, voluntary payments made outside a divorce or separation decree are not deductible. Alimony you receive is taxable in the year you receive it.
Child support payments are neither deductible to the payer nor taxable income to the recipient.
Property settlements incident to divorce generally don’t have income tax consequences, although exceptions apply.
You may not be able to claim your dependents. Generally, you must be the custodial parent to be able to claim your child as a dependent. What’s a custodial parent? You’re considered a custodial parent if your child lived with you for the greater number of nights during the year. However, even if you’re not the custodial parent, you can claim your child if your former spouse releases the dependency exemption to you. When that’s the case, you’ll need to attach Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, to your tax return each year you claim the dependency exemption.
A divorce complicates your life in many ways. Let us ease your mind about the tax implications.
Give us a call today at (360) 671-0700 or contact us using the form below to schedule a free consultation.