Divorce,and,Your,Tax,Bill,Some law Divorce and Your Tax Bill: Some Basics
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It is tax time and many divorcing couples are getting questions from their accountants to determine how their taxes will be paid. Divorce has huge tax implications because of tax status of such matters surrounding a break-up such as spousal support, child support, and community property. While you should consult with an accountant or a tax lawyer, here is a general informational understanding of how the end of your marriage will affect how much you will owe to the government this year.Even if you got a divorce, you may still be considered married from the vantage point of the IRS if your paperwork was finalized between the first of the year and April 18. An advantage of this is that being married carries a number of tax advantages. The disadvantage is that even if you and your former spouse lived together for the majority of the year, but you two legally ended your marriage prior to January, you will not get this advantage. Even if you are not able to have your status as married, you may still be able to qualify for a third option called head of household. There are a number of specific (though commonly applicable) requirements to meet this standard, and it is probably wise to question your accountant as to whether you may qualify.During a property division, you may have to worry about any latent tax effects that could cost you. For instance, as part of divorce between a couple that has been married for fifteen or so years, one spouse takes the house and the other spouse is given enough assets and cash to offset the amount that they are surrendering from the house. A few years after everything has been finalized, the spouse who received the house decides that they no longer wish to live there and put the house up for sale. Since purchasing the house, however, the home has appreciated in value and now the spouse who took the home may have to pay taxes on the gain from any sale.Determining which spouse gets the child dependency credit as part of divorce is typically a fierce fight. The problem with the tax code is that it is not completely clear who is the custodial parent and is exclusively entitled to claim the deduction. Additionally, many couples share their children fairly equally, without a court-defined custody arrangement. It is normal, however, for couples to take the credit in alternating years.The tax treatment of alimony and child support is fairly straightforward. Your alimony payments should be tax deductible, while your child support payments will likely not be tax deductible (nor will it likely be considered as income to the recipient spouse).Divorce is tough enough as is without having to worry about how the IRS will treat any exchanges that are made. Fortunately a good tax accountant or tax lawyer should be able to make clear any confusion and prepare your taxes so as to maximize your interests.This article on how your tax bill is affected by a family break up is purely informational, not legal advice. It is also not meant to be construed as legal advice. Will Beaumont practices solely in Louisiana, where he is licensed to practice law, out of his New Orleans and Metairie offices.
Divorce,and,Your,Tax,Bill,Some