How taxes can complicate your divorce process
The tax season is upon us! If you are in the divorce process, it’s never too early to start preparing for tax season. How and when your divorce actually finalizes could have a big impact on your tax returns and similar obligations to the IRS.
The IRS (Internal Revenue Service, if you ever wondered the full name) considers you married for an entire tax year so long as you were unmarried for a single day that year. Imagine that your divorce finalized on December 30th, 2017; if that was the case, you would file as unmarried for the whole year, despite only being divorced for a day in the eyes of the divorce court.
As a divorced tax filer, you can select Single or Head of Household on your filing. Single does not give you too many tax benefits so it pays to take some time to see if you can file as the Head of Household. Being able to file as one generally gives you tax breaks greater than if you were Single but slightly less beneficial than if you were married.
You may file as Head of Household if:
- You were divorced by December 31st of that tax year.
- You paid 51% or more of the costs to maintain your household while married.
- Your spouse lived with you for at least half of that tax year.
Are Your Children Your Dependents?
Only one parent in a divorce has the right to claim their children as dependents and earn important deductions. The parent who has been granted full or primary custody of a child is granted the right to claim that child as a dependent. For most divorced couples, this make sense to them but for some, it is not beneficial. If you are a custodial parent but do not want to claim your children as dependents, perhaps to give your ex-spouse some help with their taxes as a sign of good will, you can both use an IRS Form 8332 to transfer dependence.
Property deductions are entirely based on how your assets were divided during your divorce. This can make property division a major point of contention between spouses once they realize that they stand to save or lose significantly, depending on what they do or do not own during the upcoming tax season. If you need help with your divorce and understanding how it will affect your taxes, contact The GEM Family Law Firm and our Denver family law attorneys today.