Divorce & Taxes

This photo is courtesy of Pixabay.com

Unfortunately, life doesn’t always work out as planned.  One day, love is in the air, flowers are blooming and vows are promised. The next day, the couple is in court dividing property down to who gets Fido!  What happens to the tax return - part of the year, the couple was married, the other part they weren’t?  Are they able to file a joint tax return since they were married part of the year?  Can they file married filing separate?  Who gets to claim the child?

These are very good questions and very common.  Here are some answers that may help:

Marital Status:  December 31^st is the date to remember in terms of what filing status should be claimed on the tax return.  Marital status at the end of the tax year determines how the tax return should be filed.  It doesn’t matter whether or not the marriage lasted for more than half the year.  If the divorce was finalized on December 31^st, do not file a joint tax return nor a married filing separate tax return.

The appropriate filing status may be single.  If there is a qualifying child, then the head of household filing status may apply.  The head of household status is more favorable because it provides a larger standard deduction ($9,300 in 2016 versus $6,300 for the single status).

Who claims junior? Review the divorce decree for specifications as to which party claims the dependent for which year.  The non-custodial parent should request the custodial parent sign the Form 8832 and the non-custodial parent attach this signed form to the tax return.  According to 26 US Code §152(e)(2) the non-custodial parent needs to attach written release of claim to be granted the dependency exemption (claim the child).

Alimony This is taxable income to the recipient.  Child support is not taxable income however, alimony is and must be claimed as income not subject to self-employment tax.  The payer of alimony receives a tax deduction on their return for the payments made.  Again, there is not a deduction for child support as it is not taxable income.

Tax law can be complicated, seek the assistance of a trusted advisor, a tax professional.

This blog is not meant to offer legal or comprehensive advice.  You should consult a tax professional for questions regarding your unique situation.