Filing taxes after divorce might cause you a lot more trouble than you expect. If you have successfully brought your divorce process to an end, don’t relax too quickly. Taxes will soon come after you. They irritated you while married and will continue to do so while you’re divorced. However, if you know this four things about filing taxes after divorce, you will beat them quickly.
Be Careful With the Dates
This is a common trap for many people. You might think if got a divorce in the second half of 2016, then you will be filing taxes separately. It turns out that this assumption is wrong. It is your martial status by the end of the year that determines how you are going to file tax returns. Basically, you can consider yourself single if you divorced on December 31. Couples can still be filing taxes after divorce together. However, such a decision is not always beneficial financially.
When it comes to taxes, your status is not only limited to single or married. You can as well qualify as “head of the household” and it could save you some earnings. The third status was intended for single people at first, however, with time it got more flexible. If you’re in a middle of a divorce, you can qualify too. Here is what you need to do specifically:
- to have lived apart from your spouse for the last six month of the tax year
- paid more than half of the cost of maintaining your main residence.
- to claim your child as your dependent (under the rule for children of divorced or separated parent).
Splitting the House Might be a Trouble
Know that you don’t have to pay taxes on property which is transferred during divorce. But if you get the house, it will come with taxes. The reason for all these is capital taxes. Those are still in place even for recently divorced couples. And they will be there again if after divorce you decide to get rid of the house.
Usually, married couples don’t pay taxes on a gain up to $500,000 on their main residence. However, when you’re single, you can be freed only from the half of that. Your house might currently sell more than what you and your spouse paid for it. In such case, you will owe taxes.
All of this goes not without a trick. It applies if you moved out of the house before the divorce was finalized and eventually got the house in proceedings. In such case, you can still consider the house as your main residence.
When Your Kids Become Your Dependants?
Sometime ago custody was fairly simple. Mainly, mothers got the custody and therefore the right to call them dependents. Now, custody has become more flexible. It can be shared over weekends, vacations, etc. Usually, your kids become dependants if it was designated by court order. But what to do if there is neither such order nor joint custody? Then, the custodian parent becomes one who has physical custody of the child for most of the year.
Wait, but what if your share custody 50-50? Claiming the same kid as a dependent of both parents is not an option. Some parents switch turns for who claims the child from one year to another, thereby sharing the tax advantages. If you have one child, that’s the only thing you can do. If you have more than one, then the best would be to divide the dependency between you and your spouse. This is possible even if both kids spend equal time with every parent.
Alimony and Child Support
While you might be happy to get your ex-spouse paying the alimony, there is one thing you should know. Alimony is taxable to the recipient. In contrast to alimony, you can enjoy being tax-free when you have child support. Yes, it does not influence your taxes in any way.
This can give a reason to your ex-spouse to try to count part of child-support payments as alimony, taking into account that state laws are somewhat complicated when it comes to supporting requirements.
You should always be prepared to the complicated process of filing taxes after divorce. Keeping these important aspects in mind, you will face them head-on.