Taxes and Divorce
One situation more confusing and frustrating than the divorce itself is having to file your taxes during the divorce. The four tax areas we most often get questioned about is the filing status, child tax exemptions, child support, and spousal support.
I will try and explain what you need to know about each. Please remember, we are Las Vegas divorce attorneys, not CPA’s. Be sure to talk to your tax expert before filing your taxes.
The date your divorce is final and your status as a custodial or non-custodial parent will affect these areas. The important date to pay attention to is December 31 of the tax year. How you file your tax return depends on your marital status at the end of this year. If you are divorced prior to midnight on December 31 of the tax year, you will file separately from your former spouse.
If you are unmarried or legally separated from your spouse under a divorce or separate maintenance decree by the last day of your tax year, your filing status is considered “unmarried for the entire year. The importance of filing separate returns is the “Head of Household” status. Head of Household status will typically receive more tax exemptions.
If you are not divorced or legally separated prior to December 31, you must file as “married separate” or “married joint”. People who file as “married joint” must work on their tax return together. Trying to file jointly with someone you are going through a divorce battle with can be challenging. sFiling “married separate” will usually result in a larger tax liability or lower refund.
In 2015 the IRS allows you to deduct $4,000 from your gross income for every child. This is a nice tax credit. Who gets the exemption, you or your ex?
Your divorce decree may designate who will claim the children as exemptions on their tax return. If there is no specification about this, the exemption goes to the primary custodial parent. When there is joint custody, the child exemption goes to the parent who has the child the greatest number of days during the tax year.
Although the parent with primary custody of a child is entitled to claim exemption for that child there may be times to transfer the exemption. One example is when the custodial parent’s income or other tax deductions make it better to trade the exemption with the other parent.
The IRS looks at child support and alimony completely opposite when collecting taxes. The payer of child support cannot deduct this expense from their taxes and the receiver of child support does not claim the money as income. Child support is considered post-tax money.
The payer of alimony (aka spousal support) is allowed to deduct this expense from their taxes and the receiver does pay taxes on alimony received. Large distributions or personal property can often be labeled spousal support in the divorce decree. Be careful, because this could trigger a tax.
The final conclusion is, we are good divorce lawyers, not good tax advisers. We know enough about taxes to hurt ourselves. Make sure to contact your CPA before making any final decisions.