If you’re involved in a divorce, you may be worried about child custody, alimony, and property division. However, you must also consider tax implications when the divorce is final. The following is an overview of several important factors when it comes to filing taxes after divorce for years to come.
Your New Filing Status
You and your spouse can negotiate in your divorce proceedings whether or not you want to file jointly or separately for the year of divorce. The IRS allows spouses to partition their income for the year of divorce, so they can file as if they were divorced on January 1 of that year, if the divorce decree outlines that agreement of the parties. Speak with a tax advisor to understand your options and to decide how to proceed.
Dependent Children
Per the IRS, only one parent can claim a child as dependents when filing taxes after divorce.
In most cases, the parent who has the child 51% of the year or more gets this deduction since he/she is the parent whom the child lives with for most of the tax year. Claiming a child as a dependent also means claiming the child and dependent care credit and earned income tax credit (EITC).
Noncustodial parents cannot claim the child and dependent care credit and EITC.
However, if the custodial parent signs Form 8332 (Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent), then the noncustodial parent can file the Form 8332 with his or her taxes and safely claim the child(ren) listed as a dependent, utilize any Child Tax Credit as applicable, and other forms of credit as allowed by the IRS.
Update W-4
Each employed spouse must complete a W-4, which tells your employer how much tax to withhold from your paycheck. Since joint filers evenly divide their W-4 withholdings, a divorce could mean adjusting or recalculating your allowances.
If you are interested in filing for divorce in McKinney, TX, contact Camille Borg Law PLLC today.