Not only does
divorce bring considerable changes to the way you live, but also how you file
your taxes and which exemptions and deductions are able to claim. Ignoring
the tax implications can consequences of divorce can make the divorce
process more painful.
The following are the most common tax consequences of divorce:
Tax filing status – Beginning in Year 1 of the divorce, you can no longer file “married,
filing jointly.” Even if your divorce started prior to the end of
the year or even if you are living separately without depending on each
other’s income, you can’t file your taxes under this status.
Dependency exemption – Only the custodial parent has the right to claim the child as
a dependent. According to the IRS, this means the parent who has the child
for more than one-half of the year. However, if both parents spend one-half
of the year equally then it is the parent who pays for
child support. If neither parent pays child support despite splitting equal time with
the child, then it is the parent with the higher adjusted gross income.
Alimony – Under current law, alimony is taxable income to the receiving
spouse, while paying spouse can deduct alimony paid for federal income
tax purposes. However, after Dec. 31, 2018, the new Tax Cuts and Jobs
Act (TCJA) eliminates the deduction for alimony payments, so recipients
will no longer have to include alimony payments in taxable income.
Dividing property – If one spouse buys the other out of the marital home, the buying
spouse will also maintain these tax deductions moving forward. However,
if you decide to sell the marital home, there are several tax issues that
need to be taken into consideration based on the circumstances leading
up to the sale. For instance, if one spouse decides to live in the home
pending its sale and continues to pay the mortgage interest and taxes,
then he/she would take all of the deductions on their return. If both
spouses are still living together in the home pending the finalization
of the divorce and are sharing all the interim expenses, they will typically
agree to equally split all mortgage interest and taxes paid up until the
day that one spouse moves from the home permanently.
For more information,
contact our Daytona Beach divorce lawyer at
Stepniak & Park today.