| Divorce and Uncle Sam: Top 10 Things
You Should Know When Filing Your Taxes by by Jessie Danninger, CPA,
Rosen Divorce
If you’ve recently divorced or separated from your spouse,
here are a few things you should know for the upcoming tax season:
1.What is my filing status? (Married, Single, Head of Household)
Marital standing at year end determines your filing status for the
entire year. If you have a decree of divorce or separate maintenance,
signed by a judge, you should file as single. Regardless of whether
you have a signed decree you may be able to file as head of household.
Filing as head of household may reduce your income tax obligation,
but to qualify the following conditions must be met:
oYou paid more than ½ the cost of keeping up your home for
the tax year,
oYour home was the main home for your child for more than ½
the year, and
oYour spouse hasn’t been a member of the household for 6 months.
If you can’t file as single or head of household, then you must
either file as married filing joint or married filing separate.
6.Should my spouse and I file as married, filing separate or married,
filing joint?
Filing joint may provide some tax benefits over filing separate. However,
by filing separate the IRS can’t hold you responsible for any
unpaid taxes caused by your spouse’s actions or omissions. The
“innocent spouse” rule provides relief from this responsibility
in some cases.
2.Is alimony taxable?
In general, alimony is taxable to the recipient (line 11 of the 2004
Form 1040) and deductible to the payor (line 34a of the 2004 Form
1040). However, some couples stipulate in their separation agreement
that the alimony won’t be deductible to the payor, or taxable
to the recipient.
3.Is child support taxable?
No. Child support is neither taxable to the recipient nor deductible
to the payor.
If the payor owes both alimony and child support but pays less than
the total amount owed, the payments apply first to child support and
then to alimony. If the separation agreement doesn't delineate separate
alimony and child support payments, general "family support"
payments are treated as child support for tax purposes, unless the
alimony qualifications are met.
4.Who gets to claim the dependency exemption for the children?
In general, as long as the parents combined contribute at least ½
of the support of the child, the custodial parent gets the dependency
exemption for the child. If custody is split or undeterminable, the
parent who had physical custody for the greater part of the year gets
the dependency exemption. Custodial parents can waive their right
to the dependency exemption by filing Form 8332.
5. Who gets to claim the Child Tax credit and the Household and Dependent
Care credit.
Only the parent who claims the exemption for the child may claim the
Child Tax credit for that child. Unlike the exemption, it can’t
be traded. If you are the custodial parent, you can claim the Household
and Dependent Care credit for the child even if you cannot claim the
child’s exemption. If you are the non-custodial parent, you
cannot claim the Household and Dependent Care credit for the child
even if you can claim the child’s exemption.
7.Are my divorce costs deductible?
In general legal fees are considered personal expenses so they aren’t
deductible.
However legal fees paid to get alimony and legal fees regarding the
tax effects of divorce are deductible. The attorney must allocate
fees paid for deductible and non-deductible services otherwise the
deduction may be disallowed. The allowed deduction is a miscellaneous
itemized deduction which is deductible only to the extent that, in
the aggregate, the miscellaneous deductions exceed 2% of the taxpayer’s
adjusted gross income.
8.My spouse and I are using the married, filing separate filing status.
Can I use the standard deduction if my spouse itemizes?
No. If spouses are using the married, filing separate filing status
and one spouse itemizes their deductions, the other spouse must itemize
as well.
9.Who gets the mortgage interest deduction and other itemized deductions?
If the marital home is owned by one spouse alone, only that spouse
may claim a mortgage interest deduction. Deductible expenses that
are paid out of separate funds, such as medical expenses, are deductible
by the spouse who pays them. In general, deductible expenses paid
out of joint funds are split 50/50 between the spouses, including
mortgage interest. Mortgage interest for property titled by the entireties
can be claimed by whichever spouse actually paid the expense.
10.Where can I go for more information about divorce and tax issues?
www.rosendivorce.com
For more information on Rosen Divorce, or for an interview, please
contact:
Alison Kramer, Director of Public Relations, Office: 919-256-1542,
Cell: 919-523-7104 akramer@rosen.com or visit: www.rosendivorce.com
***
With offices in Raleigh and Charlotte, Rosen Divorce is the largest
divorce firm in North Carolina. Founded in 1990, the firm is dedicated
to providing individual growth and support to couples seeking divorce
by helping them move forward with their lives. Our staff of attorneys,
accountants, and specially trained divorce coaches expertly address
the complex issues of ending a marriage. Our innovative approach acknowledges
that divorce is so much more than just a legal matter. Specialties
include child custody, alimony, property distribution, separation
agreements, and domestic violence relief.
ROSEN DIVORCE
4101 Lake Boone Trail, Suite 500
Raleigh, NC 27607
www.rosendivorce.com
”Divorce is Different Here”
About the Author
Jessie Danninger is a financial analyst with Rosen Divorce. She assist
clients in all financial matters relating to divorce, including property
distribution, child custody, alimony, and tax related issues. She
is a certified divorce financial analyst and CPA.
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