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A Little Lesson About Taxes and Divorce

200264112-001Oh, tax season. The time of year when you can hear the clickety-clack of calculator buttons, and smell the nervous sweat on men and women alike. The only thing that could improve this glorious season is divorce.

…Said no one ever, not even tax specialists. In fact, the only thing that makes tax season worse is divorce (or is it the other way around?). But it doesn’t have to be all doom and gloom, taxes can still be relatively simple as long as you know the basics. Where divorce is concerned, the tax basics are: deciding on a filing status, navigating the exemptions, and figuring out the tax refund.

Find Your Filing Status

Filing statuses are fairly cut and dry, so there isn’t too much confusion or misinformation about how to file your taxes. However, there are a few options available to couples who are separating or staying together.

Generally, a person’s legal filing status goes by what their status was at the end of the tax year. If you were legally divorced, or legally separated by or on December 31st, 2012, or living separate and apart for the last 6 months of 2012, then you will file as single or head of household. If you were still legally married by or on December 31st, 2012, then you will file as married.

However, married couples do have the option of filing taxes together or separately. So if you were still legally married by December 31st, and your and your soon-to-be-ex don’t want to file together, you may file as “married filing separately.” Just note that by opting to file married but separately, you are opting out of the tax benefits of filing as married; so if you and your spouse can tolerate each other it might be beneficial to give filing taxes together one more go.

Catch a Tax Break or Exemption

The most common and plentiful tax exemptions are for married couples with children; and the most common misconception divorced couples have about taxes is that they can both take exemptions for the child. Divorced couples can divide the exemptions, but there cannot be two people claiming exemptions for one child.

Most couples choose to alternate years claiming the children on their taxes. For example, the mother would claim the children on even years, and the father would claim the children on odd years. However, the parent with primary custody of the child usually claims the child every year. If the other parent pays for the child’s medical expenses, that parent may take those deductions.

Just as a little disclaimer, one child expense that is not tax deductible is child support. The parent paying the child support cannot take deductions for the payments made because child support is considered tax neutral.

The Tax Refund Raffle

That night, after filing taxes, everyone goes to bed with dreams of a big, fat tax refund dancing through their mind. Divorce does not dissuade this pipe dream of swimming in your tax refund, but here are ways to increase your little neat refund pile. As tax refunds go, married people with children they can claim as dependents have it pretty good.

As a divorcee, you may be hanging your head, but don’t despair for too long. Divorcees can get better tax refunds if they pay alimony, if they can claim any children as dependents, and more.

Have any more pressing tax questions? Leave a comment below and we’ll get to the bottom of it for you.

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