Divorce is an emotional process and through all the stress of a separation, it can be easy to overlook important aspects such as taxes and how the split is affecting your financial future. Here are some things to know about taxes and tax credits during the divorce process.
Your filing status is determined by your marital status at the end of the year. If you have completed a settlement agreement and final decree, you can file as single and head of household, which would decrease your tax obligation. To qualify as head of household, you must meet the following requirements:
- you paid more than half the cost of keeping up your home during the year.
- your home was the main home for you and your children for at least half of the year.
- your spouse has not lived in the home for six months.
If you are eligible to file as head of household, you can still file jointly with your ex spouse. If you do file jointly, however, and your ex does not meet their IRS obligations, you can be held responsible.
Child support is not taxable to the recipient or deductible to the payor. If child support and alimony are being paid, but the payor is paying less than they are supposed to, the payments will apply to child support first, and then alimony.
No divorce costs or legal fees are deductible, as they are considered personal expenses.
Alimony is taxable to the recipient, and is deductible to the payor. This is considered earned income and you may need to make estimated tax payments on it throughout the year in order to avoid any penalties when you file. To avoid this issue, you may have your divorce decree state that the alimony will not be deductible to the payor or taxable to the recipient.
If you are the one paying alimony, your payments can be used to reduce your gross income.
Mortgage and Other Expenses
If a home is owned under the name of just one spouse, they are the one that can claim the mortgage interest. Any deductible expenses from join funds are split equally between each spouse, including mortgage interest.
Contact us During and after a divorce, you want to make sure you are legally protected and get all of your deserved assets and deductions come tax season. Glendale divorce attorney at The Sampair Group today.