How much your divorce increases or decreases your tax burden may depend on whether you and your ex or soon-to-be ex can work together with a tax professional to ease the impact on both of you. Following are some key areas where divorce can impact your taxes.
Filing status will depend on when your divorce was final and, if you have children, how much of the time they lived with you last year. If you were legally married at the end of the year, you can file jointly. If your divorce was finalized last year and your children lived with you for over half the year, you can file as “single head of household” if you claim them as dependents.
If you are receiving spousal support and/or child support, you need to claim it as income and pay taxes on it. If you are the payor, it is tax deductible. In either case, the amount must be detailed in the divorce agreement.
What you do with your home can make a big difference in your taxes. If you continue to own your home jointly, you can split the deduction for mortgage interest payments. If one spouse got the home in the divorce, he or she can claim the mortgage interest as a deduction even if that spouse is not making the payments or living there.
If you sold your home at a profit, capital gains taxes may apply. How much you pay depends on whether you file as a single person or jointly. If you sell your home during a divorce, it’s best to get some financial advice to help you avoid paying more taxes than you need to.
When it comes to claiming children as dependents, this also something that it’s preferable to work out ahead of time to minimize your tax burden. If they live with you for more than half the year, you can claim them as dependents. However, some couples choose to let whichever spouse makes less money claim them.
If you don’t already have a tax advisor, your Louisiana family law attorney may be able to recommend someone to advise you on these and other financial decisions. If you didn’t consult with a tax advisor during the divorce, you may still benefit from talking with one as you file your taxes for the first time as a divorced person.
Source: Forbes, “Getting Divorced? 8 Things You Must Know About Taxes” Emma Johnson, Jan. 19, 2015