Getting a divorce can be difficult for all parties, including financially. Your assets are now up for grabs, not only by your soon to be ex, but also by the IRS. Divorce impacts your taxes a lot, so you should be aware of the expectations at tax time when you get a divorce.
Either you’re single or you’re married. Checking the appropriate box may not seem complicated but for those going through the process of divorce it becomes a chore. Regardless of when you filed the paperwork, if your divorce isn’t finalized by December 31st of the tax year, you are still considered married for tax purposes.
You may be able to claim head of household if you are a parent and separated from your spouse. This status can net you greater deductions, but you have to meet certain qualifications:
- Lived apart from your spouse for the final six months of the year
- Your dependent child lived with you for over half the year
- You were responsible for over half of the cost of your housing
Once you decide to separate from your spouse, if you have children, you taxes can get more complicated. Generally, in order to claim exemptions for your children, the dependent must live with you for over half the year. However, by signing a written contract, you can determine which parent gets the child’s $4,000 exemption.
Alimony and Child Support
Once you have a legal divorce decree, you may be responsible for alimony. Alimony payments are deductible by the person who pays them, and they are counted as income for the receiving party.
Child support payments are neither deductible nor counted as income. It’s important to make specific declarations in the divorce agreement as to how payments are designated, as different payments are taxed based on their designation.