10 Things You Need to Know About Divorce and Taxes
Divorce is difficult enough. What could add to the anxiety that divorce brings? Taxes. If you are one of the many people who recently divorced, this year, as a result you will be coping with new tax issues, and may even be filing your own tax return for the first time. Here are ten tips to help you handle tax issues now that you are divorced.
1. Determine your filing status. Your marital status at the end of the year determines how you file your tax return. If you were divorced by midnight on December 31 of the tax year, you will file separately from your former spouse. If you are the custodial parent for your children, you may qualify for the favorable head of household status. If not, then you will file as a single taxpayer, even if you were married for part of the tax year.
2. Consider the tax implications of support. Child support is not deductible to the person who pays it, but alimony is. Likewise, the recipient of alimony must claim it on her tax return, but child support isn’t reported as income. If you rolled your support together into “family support” in your agreement, that makes it fully taxable to the recipient and deductible to the payer, just like alimony.
3. Don’t run afoul of the special rules regarding support. If alimony payments are concentrated in the first year or two after divorce, the IRS may consider the money to be non-deductible property settlement. And if alimony is scheduled to end within six months of a child’s 18th or 21st birthday, the IRS may consider the alimony, in reality, to be disguised child support.
4. Review your divorce decree to see who will claim the children as exemptions. If divorce agreement did not specify who claims the children as exemptions, then the exemption for your kids goes to the custodial parent. If you have joint custody, the exemption goes to the parent who has the child the greatest number of days during the tax year.
5. Get signed Form 8332 if required. If you are entitled to claim the tax exemption for children who spend less than six months of the year living with you, then you will need your ex-spouse to sign IRS Form 8332 (Release of Claim to Exemption for Child of Divorced or Separated Parents). A copy of this form must be filed with your income tax return for you to claim the tax exemptions for children not living with you.
6. File first if exemptions are an issue. If you are entitled to claim the children on your return, but your ex threatens to claim them instead, file early in the year. That way, since you’ve already claimed the children, the IRS will make your ex prove he or she was entitled to the exemption.
7. Claim the child care credit if you are eligible. If you are the custodial parent and you incur work-related child care for children under the age of 13, you may be able to claim a credit for a portion of the cost. Unlike the exemption, which can be assigned using IRS Form 8332, the child care credit is available only to the custodial parent.
8. Review legal fees paid during your divorce. Although most legal fees are not tax-deductible, fees you paid for advice concerning the tax consequences of your divorce can be taken as an itemized deduction on Schedule A of your tax return, as can fees incurred to obtain alimony. Other fees, such as the cost of preparing a new title for your rental property, can be added to the tax basis of your assets.
9. If you are employed, change your withholding on Form W-4. You can claim one additional exemption for every $3,600 or so of deductions, including alimony payments. If you are receiving alimony, consider asking to have extra tax withheld from your paycheck to cover your new tax liability.
10. Make estimated tax payments if withholding isn’t enough. If your withholding won’t be enough to cover your taxes for the coming year, set up quarterly estimated tax payments so that you won’t owe taxes and penalties at the end of the coming year.
Divorce may not be as inevitable as taxes, but it certainly brings complications to tax filing. Follow these ten tips, and the process should go smoothly in the future. Once your divorce questions are answered, TurboTax can handle your tax return.
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I need to file my taxes early so my ex does not try and claim my son….How can I file early if I have not receive my w-2 yet?
I am having trouble pulling up my 2009 turbotax return. I was up to the payment screen before 4/15/10 and saved my work so I could print and file later (printer was out of ink). Now I cannot pull up my return. I have to file with Home and Business. I decided to buy the CD version after I had started my online return because I realized I needed to use the program throughout the year for the next year’s return. How can I get my return?
I had a computer software problem when I got my disk and couldn’t load the .NET framework version. I have solved the problem and reloaded the turbo tax program. Now your site says they have no data for me for 2009.
If i was divorced on July 31, 2010, Can i still file jointly?
TD,
Sorry, but if you were divorced by midnight on Dec. 31, you are considered unmarried for tax purposes, so you can’t file jointly, even though you were married for part of the year. But if you have a child in your home, you might be able to file as head of household, which gives you a better tax rate than single (though not as good as joint filers get).
Marcia,
You are right, you’ll have to wait until you receive your W-2 before you can file. But be Johnny-On-The-Spot and get your return filed right after that.
If you really want to be an attorney, then by all means, go to law school. But unless you really want to enter the practice of law, don’t do it. If you’re only motivation for going to law school is money, you could be in for a huge disappointment. It is true that the employment prospects in law are not exactly amazing at the moment, and you could find yourself unemployed with huge debts.Nice information.
Question is:
If my divorce has been dragging on for 3 years as spouse will not sign msa papers, and I used attorney to solely to represent my interest for alimony income in 2008-9 (divorce filed in 2008),
Can one deduct from these two prior years on the 2010 tax return attorneys fees paid for
A. the attorneys fee’s judge order ex spouse to pay, but I am paying,as he defaulted on judges order, back in 2009.
B. The attorney’s fee’s I paid upfront in 2008 for x dollars? The entire basis of the my hiring an attorney was to represent my interest on the basis of alimony, the other jargon, I can did alone, like the financial statements for the court, turned them into the attorney to file with the court; etc.
I am divorced (Febr 2011) and we have rental property. The decree states that we will split all tax fees, refunds and etc.. I make more money and we have no dependents. Who would be the best person to claim taxes on the property and etc during tax time? Could we split it?
Hi Melissa,
Not sure what the divorce decree states about the rental property, but if it states you should split it evenly then the decree should be followed. If it does not state specifics regarding the property, it is up to you how you want to split it. You do have the ability to split the rental property and TurboTax software gives you the option to split ownership and automatically makes calculations based on the percentage split. You can also use TurboTax TaxCaster http://turbotax.intuit.com/tax-tools/ to get an estimate of which option is best for you.
Thank you,
Lisa Greene-Lewis
My husband and I moved to Arizona to start a bring a new business(mine) and he bought a home in his name. We filed for divorce in November this year, and he moved back to Wisconsin. He sold the home, while I have a condo in Green Bay, that was leased until May this year, so we could live down here in the winter. I don’t know if I should file alone, or with my future Ex. He’s in another state, and I have alot of deductions with my condo.
Any input would greatly be appreciated. I’m on talking terms with him, should we have to file together.
Thanks,
Sandy
Hi Sandy,
You are considered unmarried for the whole year if, on the last day of your tax year, you are unmarried or legally separated from your spouse under a divorce or separate maintenance decree. If this is the case, you would be able to file as single.
Thank you,
Lisa Greene-Lewis
Sandy,
As Lisa said, if you were divorced by 12/31, then you must file as single. But if you were still married, you have a choice. If he agrees, you might want to figure the taxes both ways to see which way saves the most in taxes. But filing separately may be your best bet, since you have so many deductions.
Hope that helps.
Ginita Wall
I got divorced on October 2011 and then got married on December 2011. I still supported my ex wife for the whole year since she is not working and we have a son together. How should I file my taxes? Should I claim my ex-wife? Thank you
Hi Alonso,
You have to file married filed jointly or married filed separately with your new wife. Unfortunately you cannot claim your ex-wife as a dependent under the “qualifying relative” rules. If the support you’re paying is considered alimony on your divorce decree then you can deduct it on your tax return. TurboTax will guide you through the entry.
Thank you,
Lisa Greene-Lewis