Getting a divorce or dissolution of marriage is never easy. Divorce complicates virtually every aspect of your life, and taxes are no exception. Hopefully your divorce attorney considered your taxes when crafting your divorce decree, but this is not always the case.
An experienced San Francisco tax preparer will be able to ask you the right questions to be sure that your tax return after your divorce is as accurate as possible. Kaufmann Advisors has the knowledge and expertise to help you file your income taxes after your divorce. The following is our top five ways that your divorce may change or affect your individual income tax return.
Your filing status will change after a divorce. This probably goes without saying, but many people do not realize the significant effect that this can have on their tax return. Those who file “single” do not have as large of a deduction and cannot take as many exemptions when compared to filing as “married.” This can affect your return by thousands of dollars in some situations.
Your marital status at the end of the year, December 31, will determine your filing status. If your divorce is final any time before that date, then you will file as either single or head of household. Whether you have custody of the children can also affect your filing status. Those who have a qualifying dependent can file as “head of household” instead of single, lessening the negative effects of a filing status change.
While your divorce is pending, you may need to file as married filing separately. This filing status has the least amount of benefits for the filer, so many individuals are motivated to finalize their divorce as soon as possible for tax purposes.
If you have children or other dependents, you and your spouse were likely both able to claim them on your combined return. Once you are divorced, the rules change. Usually your divorce decree will specifically lay out whom your children will live with, and that will determine who can claim the children on their taxes. The child must live with you at least six months out of the year to be considered your dependent.
In some situations, the divorce decree will specifically state how the couple will claim each child for tax purposes. Some couples will claim a child as a dependent every other year regardless of where the child lives. In other situations, one parent will always claim the child regardless of where he or she lives. Each divorce situation is different, so you will need to check your divorce decree for information unique to your divorce.
If you plan to claim a child that does not live with you at least six months out of the year, then you will need to have your ex-spouse sign IRS Form 8332. This will release that spouse’s right to claim the child and allow you to claim the child. This form should be filed with your tax return each year that you claim the child but he or she does not live with you.
If you pay or receive child support, that can affect your income tax situation as well. Paying child support is not a deduction. Receiving child support is also not considered income. It is one of the very few situations where an individual will receive money but is not required to report it to the IRS.
When you have custody of your child or children, then you will be able to take the child tax credit in most situations. This credit is not one that can move from parent to parent, unlike claiming the child as a dependent. This credit can be up to $1,000 per child, so for many families this credit is very significant.
Alimony or spousal support is treated completely differently when compared to child support. The individual who pays the alimony or spousal support can deduct that amount from their taxes. The person who receives this payment must report it as income on their tax return.
In some situations, if you are making payments on a mortgage instead of paying alimony directly, you may be able to deduct those mortgage payments as alimony. This does not apply in every situation, so it is important to talk to an experienced San Francisco tax preparer for more information.
Splitting property in a divorce can have very significant effects on your income tax return. Each situation is unique, so it is difficult to make general recommendations in this area. Contact Kaufmann Advisors to speak with a professional San Francisco tax preparer who can walk you through each change that your divorce may have caused. Click on the profile below or use the Contact button to get started.
Simon Hase, CPA