During tax season, divorced and divorcing couples have important questions to answer when filing. Whether you filed for divorce in 2013 or you are considering a divorce this year, it is important to consider how divorce may impact your taxes. Many couples don't realize how complicated filing taxes can be after divorce, until it is too late. It could also carry additional financial obligations for which many newly divorced couples are not prepared. OurBirmingham divorce attorneys are experienced in complex financial issues that may impact a divorce or settlement. In addition to raising awareness of these issues, we also will protect the rights of individual clients as they navigate the divorce process.
For most couples, tax events do not become an issue until after the divorce is finalized. Here are five key divorce tax questions faced by Alabama couples:
Who claims kids as dependents?
This is an important question because deductions can be valuable for the parent that claims the children as dependents. Prior to 2009, parents could specify in a divorce settlement what parent claimed the deduction. Now, divorce settlements cannot be used to support dependency claims. Parents must use the IRS Form 8332 and it must be signed by custodial parent for use by the non-custodial parent, essentially allowing the release of exemption claim. For each dependent, you can deduct $3,900 from federal tax income. To qualify, the child must live with you more than half the year and be under the age of 19 or a full-time student under 24.
What is filing status for the year of divorce?
After a divorce, you may think you can still file jointly if you were married part of the year, but this is not the case. If you were divorced at the end of the tax year, then you must file single. If you were recently divorced and considering how to file, it is best to consult with an experienced tax advocate who can help identify your tax obligations after divorce.
How is alimony taxed?
If you are paid alimony by a former spouse, remember that you must claim the payment as income and pay taxes on it. It may come as a surprise, but you could be liable for additional tax burdens. Conversely, alimony payers get to claim the payment as a deduction.
Do I pay taxes on child support?
Unlike spousal support or alimony which is considered income, child support is not taxed. It is also not deductible for those paying child support.
How will divorce impact mortgage deductions?
If one party decides to keep the marital home, he or she can claim the mortgage interest deduction. Your mortgage interest is tax deductible, which can be one benefit to keeping a family home.
Divorce can have significant tax consequences, so it is important to fully understand your obligations. Every couple has unique circumstances so it may not be clear if your tax responsibilities will go up or down after divorce. You should review your case with an experienced advocate who can keep you abreast of your rights and obligations.
If you are seeking a divorce in Birmingham, contact Family Law Attorney Steven Eversole at (866) 831-5292.