While divorce is an emotional process, there are also numerous practical and legal considerations related to divorce. Taxes, for example, can become much more complicated during or after a divorce. The best way to ensure that you are not making a costly mistake on your taxes is to consult with both your estate planning attorney and a tax professional before filing. In the meantime, a Murfreesboro divorce attorney at Bennett | Michael | Hornsby offers some general information about filing taxes while in the middle of a divorce or if you were recently divorced.
Filing Status for Tax Purposes
When it comes time to file your personal income taxes for the year, you must choose a filing status. Your filing status options will depend on your legal status as of December 31st of the tax year. If you begin a divorce in 2023 but the divorce is not finalized until 2024, your legal status at the end of 2023 is married. Therefore, your filing status options are “married filing jointly” or “married filing separately.”
If your divorce was finalized by December 31st of the tax year, you have the option to file as single or potentially as “head of household.” The general guidelines for filing as a head of household require you to have had a child living with you for more than half the year and you must have provided more than half the support for the child. Because of those guidelines, both parents cannot claim head of household based on the same child.
What Are the Benefits of the Filing Status Options?
You have likely filed as married filing jointly for the duration of your marriage. As you are now faced with the option to file using a different status, you may be wondering what the benefits are to changing your status.
Typically, the benefit to filing as married filing jointly while your divorce is pending is that you will usually end up paying less taxes than you would if you both filed your own separate tax return.
Filing as married filing separately may be beneficial if your income puts you in a lower tax bracket and/or you had considerably more deducted throughout the year. Another reason to file separately is if you are concerned that your spouse will owe a sizeable tax debt and/or your spouse is being less than forthright on his/her tax return. Filine separately can help you avoid liability for your spouse’s fraudulent return or tax debts.
The benefits to filing as head of household include a larger standard deduction and lower tax brackets that, combined, usually result in a larger tax return.
Who Can Claim the Children as Dependents?
When there are minor children involved in a divorce, the issue of claiming the children as dependents for tax purposes can be an important one. It can even be the sticking point when the parties are negotiating a settlement agreement because each dependent provides a deduction that lowers the taxpayer’s taxable income amount. In addition, if you can claim a child as a dependent you can also use that child to qualify for the Child Tax Credit (valued at $2,000 for 2023).
Much like the rules for claiming head of household, the IRS includes a dependent as someone who lived with you for over half the year and who you financially supported. If you and your spouse/former spouse share 50-50 custody, the IRS has published “tiebreaker” rules to help determine who is allowed to claim a child as a dependent.
If you are negotiating your divorce, pay close attention to the topic of dependents for the purpose of tax filing. Ultimately, the terms of your divorce will likely dictate who gets to claim a child as a dependent after the divorce. Sometimes, one parent claims all the children until they reach adulthood. Other agreements split the children equally between the parents while still others have the parents rotate years with one parent claiming them in year A and the other parent Claiming them in year B.
Support and Alimony
Finally, you may wonder how to handle child support or alimony received or paid throughout the year. This one is relatively straight-forward. Child support payments are not counted as income for the payee’s tax purposes, nor are they counted as a deduction for the payor. If you pay alimony, you can take a deduction for that if you follow some simple rules pertaining to how you pay your alimony obligation. Conversely, the alimony recipient must pay taxes on the amount received.
Contact a Murfreesboro Divorce Lawyer
If you have questions or concerns about how to handle your tax return during or after a divorce, consult with an experienced Murfreesboro divorce lawyer at Bennett | Michael | Hornsby as soon as possible. Contact the team today by calling 615=898-1560 to schedule your free appointment.