Determine Who Will Claim A Dependent Child If Filing Separate Returns
Generally, the parent with custody of a child can claim that child on their tax return. If parents split custody fifty-fifty and aren’t filing a joint return, they’ll have to decide which parent gets to claim the child. There are tie-breaker rules if the parents can’t agree. Child support payments aren’t deductible by the payer and aren’t taxable to the payee.
Asset Transfers: Filing Taxes After Divorce
When a divorce settlement shifts property from one spouse to another, the recipient doesn’t pay tax on that transfer. That’s the good news.
But it’s important to remember that the property’s tax basis shifts as well. So, if you get property from your former spouse in the divorce and later sell that property, you will pay capital gains tax on all the appreciation before, as well as after, the transfer. That’s why, when you’re splitting up property, you need to consider the tax basis as well as the value of the property.
Income Tax Filing Status Options
Single
- Not married during the year.
- Have obtained a divorce, separate maintenance agreement , or annulment by the last day of the year .
You are legally married on the last day of the year .
In most cases , filing a joint federal tax return will save on income taxes. There are some credits and deductions that are not available with the filing status such as American opportunity credit, lifetime learning credit, tuition and fees deduction, student loan interest deduction, and the earned income credit.
If there is an error on jointly filed returns, both spouses are equally liable for the tax due. If you think your spouse is not reporting all of his income on his income tax return or is claiming bogus deductions, you may want to consider filing a return.
You are legally married on the last day of the year .
One advantage of is that you do not need to communicate as much with your spouse. This is especially helpful if the divorce is charged with emotions. You do need your spouses name and Social Security number. You also need to determine if they are itemizing deductions.
If one spouse itemizes deductions, both must itemize .
NOTE: If you provide over half of the support for a child, then you may be able to use the head of household status .
House of Household
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Tips For Filing Taxes After Divorce
Divorce can completely change many aspects of your life, including how you file your taxes. All the changes can be confusing and you’ll have to make some decisions that might feel hard to make because you’re not sure whether you should do this or do that. Here are some tips that will help you navigate through the tax season as a newly divorced man.
Your martial status on the last day of the tax year should determine how you file your taxes. If you were married for most of the tax year and got legally divorced only in the last few months, you still are required to file as divorced.
If you were separated but still married on the last day of the tax year, you can file either a joint return or a separate return. Youll get the lowest effective tax rate, the largest standard deduction available, and personal exemptions with a joint return. But you cant claim a deduction for alimony on a joint return and youre liable for mistakes that your spouse might make on her return. Talk with an attorney to see which option is the best for you.
One of you might be able to claim head of household to receive more tax savings. If youve lived apart for the last six months and you paid more than half of the costs to support the household that includes a dependent, you could claim head of household and your ex would file as a single taxpayer.
The same thing applies to charity donations. If you paid your donations with a joint account, you can only claim 50 percent of the donations.
Claiming Dependents On Taxes When Youre Divorced
When divorcing parties share minor children, it raises the question of who claims the children on taxes. How parents claim dependents on taxes after divorce depends on the court order, as well as who has primary custody of the children.
How Do Divorced Parents Claim Dependents?
Divorced parents claim dependents as follows:
- If the court order specifies who may claim the minor dependent, it is controlling. If the non-custodial parent claims the child, the other parent must sign Form 8332 to release their claim of exemption for the child.
- In the absence of a court order, the custodial parent may claim the child tax credit and dependent care credit. Primary physical custody is the type of custody used to determine the custodial parent for tax purposes.
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Alimony & Child Support
One of the biggest changes from the Tax Cuts and Jobs Act, or 2017 tax reform bill, was how alimony is treated on the tax return. Alimony payments are not automatic and must be defined in a divorce agreement. Alimony, or spousal support, payments are considered income to the recipient and a deduction to the payer for agreements entered prior to 2019. Payments based on agreements entered, or with certain modifications made after, 2018 do not require the recipient to report the income nor does it allow the payer to deduct the income.
The IRS defines alimony payments as cash payments and must be specifically stated as alimony or spousal support in a divorce or separation agreement.
Child support has never been tax deductible and the recipient doesnt pay income tax on the payment. Child support is meant to benefit children and is known as a tax-neutral exchange of money.
Filing Taxes After A Divorce
Going through a divorce can cause significant tax implications. Finalizing a divorce affects how you file your taxes, whether or not you can claim children as dependents and which tax breaks youre eligible to receive.
- Written By
Jennifer Schell
Financial Writer
Jennifer Schell joined Annuity.org in 2022. She is a professional writer with more than three years of experience creating content for a variety of industries ranging from travel to tax accounting. She combines her strong writing skills and her passion for educating others to write engaging and informative financial content for Annuity.org.
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Savannah Hanson
Senior Financial Editor
Savannah Hanson is an accomplished writer, editor and content marketer. She joined Annuity.org as a financial editor in 2021 and uses her passion for educating readers on complex topics to guide visitors toward the path of financial literacy.
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Thomas J. Brock, CFA®, CPA
Expert Contributor
Thomas Brock, CFA®, CPA, is a financial professional with over 20 years of experience in investments, corporate finance and accounting. He currently oversees the investment operation for a $4 billion super-regional insurance carrier.
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Who Is Responsible For Tax Debt In A Divorce
When a taxpayer files separately, it is clear who will bear the burden of any tax liability assessed by the IRS. However, it may not be as intuitive when a tax return is filed on behalf of two taxpayers. If a joint return is filed, the liabilities linked to this return are held joint and several between both taxpayers. This means you are both on the hook for the entire tax liability, until it is paid or released.
Filing Taxes After Divorce: Tips For Homeowners
Some divorcing homeowners end up with unanticipated tax bills when they sell their home. Find out how you can avoid being one of them.
If youre getting divorced, your home may be the biggest asset youll have to divide with your soon-to-be ex. As you decide whether to sell it and split the proceeds or let one spouse live there until the last kid launches, remember this: A third party is sometimes involved in your home sale transaction Uncle Sam.
Keeping, selling, or continuing to share your home can each create a different federal tax tab for you and your ex spouse. Heres a look at the tax consequences for six of the most common situations divorcing couples face.
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Joint And Several Liability Exemptions
In either case, we next consider whether you may qualify for any of the following exceptions to liability.
There are the three options available to provide relief from joint and several liability under a joint return:
1. Innocent Spouse Relief
This exception provides relief if your spouse :
- failed to report income
- claimed improper deductions or credits.
2. Separation of Liability Relief
This exclusion provides relief by allocating the liability between you and your former spouse you then pay only what you owe.
3. Equitable Relief
This may provide relief when you don’t qualify for innocent spouse relief or separation of liability relief for something not reported properly on a joint return and generally attributable to your spouse. You may also qualify for equitable relief if the amount of tax reported is correct on your joint return, but the tax wasn’t paid with the return.
What Should Your Filing Status Be
Determining your filing status is the first step in filing your taxes after a divorce. Depending on the specifics of your situation, you could theoretically use any of the four options:
To narrow down your choices, you need to answer the following questions:
- Was your divorce or separation agreement in place by December 31st?
- If you werenât divorced or separated by the end of the year, are you and your ex willing to cooperate on financial matters?
- Did you and your ex live together during the last six months of the year?
- âAre you the custodial parent of any children?
Your answers will help determine which status makes the most sense:
To summarize the chart above, here are the situations where you would select each filing status:
| Filing Status |
|---|
|
Filing jointly or single is relatively straightforward. Where most people get confused is filing separately from their spouse or filing as Head of Household. Letâs explore those two statuses in more depth:
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You Sell And Both Move Out
Some couples opt for a clean break from each other and from the home they shared. They sell the home and split the profit based on their divorce agreement.
If you sell a home you own jointly with your spouse, each of you can typically exclude up to $250,000 in home sale profits if youre filing as single. That exclusion increases to $500,000 if youre filing a joint return. IRS Publication 523, Selling Your Home has the details.
The IRS fine print on the exclusion requires that:
- The home was your main residence.
- You lived in and owned the home for at least two of the past five years.
- You have not already used the exclusion during the past two years.
Spouses who havent owned and lived in the home for periods totaling two of the past five years might be eligible for a partial exclusion of the gain. Youll find more information on those in Publication 523.
Here Is A Checklist Of Items To Help When Filing Taxes After Divorce:
Name and address changes
- Name. When a name changes through divorce, it is important to report that change to the Social Security Administration. The name on a persons tax return must match what is on file at the SSA. If it does not, it could delay any tax refund. To update information, taxpayers should file Form SS-5, Application for a Social Security Card. It is available on SSA.gov, by calling or at a local SSA office.
- Address. If divorce means a change of address, the IRS and U.S. Postal Service need to know. To do that, people should send the IRS Form 8822, Change of Address. Taxpayers should also notify the postal service to forward their mail by going online at USPS.com or at their local post office.
Withholding
After getting divorced, a taxpayer should consider changing his/her withholding. Newly single taxpayers must give their employers a new Form W-4, Employees Withholding Allowance within 10 days. It is likely that the taxpayer may move into a lower tax bracket or reduce or eliminate Additional Medicare Tax. They can use the IRS Withholding Estimator on IRS.gov to help complete a new Form W-4. See Publication 505, Tax Withholding and Estimated Tax for more information.
Filing status
Filing status will change to single to file federal income taxes each year. Remember, if a taxpayer is single as of December 31, the law says he/she is single for the whole year for tax purposes.
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Filing Taxes After Divorce: A Practical Guide
If youre getting a divorce, the tax implications probably are not the most pressing issue on your mind. The specifics of filing taxes after divorce and how you draw up your divorce agreement could make a big difference when it comes to your tax refund. Many couples consult a financial advisor to help them divide assets and plan for a financial future after divorce. As you prepare for your divorce needs, here are some important things to think about so you can stay on top of your taxes.
Alimony And Child Support
Alimony payments from divorce or separation agreements that were finalized before Jan. 1 are still considered an above-the-line deduction when filing taxes. But even if your divorce happened before that date, you should confirm with your tax expert to see if you can still deduct alimony payments when calculating your adjusted gross income.
On the flip side, all alimony payments received from finalized divorces before Jan 1, qualify as income . As the receiving spouse, you will need to report them as such on your Form 1040. Note that if you receive or make alimony payments, you cannot use forms 1040A or 1040EZ.
Child support payments work the opposite way of alimony payments. You cannot deduct any child support payments that you make. If you receive child support, you do not have to report it as income on your tax return.
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Deduct Certain Costs Of A Divorce
The basic costs of a divorce are not deductible. You also can no longer deduct fees paid for expenses such as tax advice relating to a divorce, determining or collecting alimony, determining estate tax consequences of property settlement, and appraisal and actuary fees for determining the correct amount of tax or assisting in obtaining alimony.
Make The Best Choice For Your Situation Before Filing
Working with your former spouse to find the best way to file your taxes during the divorce year is the optimal solution in an often painful life transition. Even when the break up is amicable, there may be difficulties in separating assets without making mistakes that can lead to future tax penalties.
Once you agree on your filing status, there are other decisions that will affect both spouses taxes such as: who claims dependent children, reporting alimony and child support, handling the home sale and deducting retirement accounts. Begin with simple tasks like giving your employer a new Form W-4, Employees Withholding Certificate within 10 days after the divorce or separation.
On the flip side, your divorce is a battle of wiles and wills. It might be best to file individually. If this is the case, you can choose married filing separately or head of household depending on your circumstances.
If you are still having difficulty making a decision, call my office at 378-3138 or visit www.sambrotman.com to set up a free one-hour consultation.
Divorce and taxes are two of lifes greatest hardships. In my experience, the more money that is involved, the more likely it is that there will be tax issues. Working together we can make the best choice for you to avoid possible IRS entanglements now and in the future.
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Can You Deduct Child Support And Alimony
You can’t claim a tax deduction for child support you might pay. The IRS takes the position that if you and your ex-partner had remained married, and if your family had thus remained intact, you could not have claimed a tax deduction for money you spent feeding, clothing, and sheltering your children. These are personal expenses, and theyre still considered personal expenses after your divorce.
Child Support And Taxes After Divorce
Child support does not play any role in taxes after divorce. For the parent who pays child support, it is just like any other bill that is not deductible from taxes. A parent receiving support does not pay taxes on it. State laws determine how taxes factor into the calculation of a child support amount.
Is Child Support Taxable?
No, child support is not taxable. The person who receives child support does not have to pay taxes on the amount that they receive. However, the person who pays the child support must still pay taxes on their income regardless of how much they pay in support. Child support may not be deducted from or added to income.
Read More: Is Child Support Taxed in Nevada?
Is Child Support Calculated Before or After Taxes?
Whether child support is calculated before or after taxes depends on state law. Some states use gross income while other states use net income to calculate child support. Nevada uses gross income to calculate child support, for example 1). The percentages used to calculate support also vary by state, so states that use gross income may use a lower overall percentage to arrive at roughly the same amount of support.
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