Tax season may be ending soon for this year, but your impending divorce is going to have a big impact on your filing next year. Knowing now what to expect will help you make some important decisions during the separation process.
Consider Filing Jointly
Your marital status at the end of the year determines how you file your tax return. So if you are divorced by Dec. 31, you’re considered single. If you are still legally married, you can file jointly or separately, but it’s often a financial advantage to file jointly. Check with your CPA about what is going to benefit you most.
Claim the Children
During your separation, be sure to decide who will claim the children in future tax filings. It’s not insignificant: for each dependent you can deduct $3,900 from your federal taxable income. Some parents alternate who gets to claim the children. But each qualifying child must live with you more than half the year, and there are some other restrictions. (Note: Be sure to file Form 8332, which must be signed by the custodial parent for use by the non-custodial parent.)
Alimony received is taxable income. Alimony paid is tax deductible.
Other Things to Know
Income Tax Debt – No breaks from the IRS; even filing for bankruptcy won’t get you out of paying income taxes, interest and penalties. If you and your spouse filed jointly to complete your 2013 return, you are both responsible for any tax debt that remains. Next year, if you file as “married filing separately,” each spouse will be responsible for his or her return and payment of any taxes.
Child Support– Child support is not taxable income, and the person paying it cannot deduct it.
Be sure to consult a financial adviser, who can discuss with you other tax implications related to your situation. Or, join us at our Wake County divorce workshop to learn more about the financial aspects of divorce.