How to Handle Taxes During and After Your Divorce
One of the most difficult things to go through emotionally is a divorce. However, although you have a lot of feelings to sort through, there are certain items to think about. Most importantly, you need to review how you will file taxes. The way in which you file will vary while you are going through the separation and after everything is settled.
Single or Married
Many divorcees wonder whether they should claim themselves as being single or married. It all comes down to what your marital status was on midnight on December 31st. If you had filed to get divorced prior to that date, then you would be considered single for the entire tax year. If you were living separately but had not yet filed the paperwork, then you are still legally considered married and would need to file as such.
Spousal and Child Support
Spousal support (i.e., alimony) is tax deductible. Child support is not. Additionally, the individual receiving the alimony would need to report those funds as income on his or her tax forms. A person receiving child support would not need to report it.
Children as Dependents
One thing that needs to be settled upon is who gets the claim any children as dependents after a divorce is finalized. You need to fill out IRS Form 8332 in order to get all tax credits. Substantial deductions stand to be made by claiming a dependent, so this is something you are your former spouse will need to decide upon.
Going through a separation is difficult, but you do get to claim certain deductions on your tax forms. It is important to understand what can and cannot be deducted. Some of the things that qualify include paying to get tax advice, estate taxes for property settlements and any actuary fees.
With the dissolution of a marriage, you may need to consider the disposition of residential property (i.e., the marital home). If you and your spouse intend to sell the marital home, you will also want to keep in mind that you and your spouse can each exclude the first $250,000 of gain from your taxable income. This exclusion only applies only to your “principal residence,” which is defined as a home in which you’ve lived for at least two of the five years prior to the sale, not to a vacation house.
Taxes are hard enough to figure out as is. A divorce can make them much more complicated. Seek out assistance when you need it for any part of the process.