However, there are certain things that individuals going through the divorce process — or who are recently divorced — should keep in mind when preparing their taxes.
Six things to be aware of:
- Be sure to select the right federal tax filing status, (i.e. “Married Filing Jointly,” “Married Filing Single,” “Head of Household,” etc.). It’s based on whether you were married or single on the last day of year. The IRS only cares whether you are married on December 31. If you are married on December 31, then it is as if you are married for the whole year — whether you married on New Year’s Eve, or 20 years prior. Likewise, if you get divorced by December 31, it is as if you are divorced for the whole year. So, if your divorce was final by December 31, 2012, then you do not have the option of filing as a married person for taxes. Your filing status options are “Head of Household” or “Single.” Typically, “Head of Household” is going to provide a slight tax advantage over “Married Filing Single” or “Single.” However, one should make sure that the requirements to file as “Head of Household” are met, Talk to JV LAW GROUP if you have any questions.
- Claim an exemption for your child if you’re allowed. You may be eligible to lower your taxes by taking the dependent exemption for your son or daughter if you were divorced or legally separated last year. To do so, you must have been named the custodial parent in your divorce decree. If you were the custodial parent, you may also be eligible for the child care tax credit and education tax credits. In some cases, the custodial parent can give the dependent exemption to the non-custodial parent by filing the awkwardly titled IRS Form 8332: Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent.
- Don’t run afoul of the tax rules for child support. Neither you nor your ex can deduct child support payments you made. But child support you received isn’t taxed as income, either.
- Avoid getting tripped up by the tax rules for alimony. If your ex-spouse paid alimony or gave you money each month to maintain your home and life, you’ll probably owe taxes on that income. Your former spouse can deduct the payments. The rules are reversed, of course, if you were the one paying alimony. In general, if you were legally separated under a decree of divorce or separation agreement and you and your ex weren’t members of the same household when the alimony payments were made, the rules are the same. Keep in mind that the IRS is strict regarding what qualifies as alimony and when the person paying it can write off the payments. Cash, checks or money orders meet the alimony test, but property does not. Moreover, if you and your spouse continued to share a residence after the divorce and he gave you alimony, you’ll owe taxes on those payments and he can’t deduct them.
- Consider using alimony you received last year to fund an Individual Retirement Account. You generally need “earned income” to contribute to an IRA — and alimony qualifies. IRA contributions for the following year can be made until April 15.
- Get up to speed on how the recent tax law could affect your current taxes. If you’re in the middle of negotiating a divorce agreement, some of the provisions in the law could “send you over a fiscal cliff of a different kind.”
Feel free to contact JV LAW GROUP. We can help.
