When going through a divorce, there are several issues that seem critical, such as who your children will live with, what will happen to the family home, and how a change in income will affect your family's quality of life. Because of this, other issues are often overlooked. One of those issues concerns taxes.
Several factors regarding taxes require attention or else they can have a much greater impact on your finances than they should. One such factor is what your filing status will be on your income tax return. You can no longer file under “married filing jointly” or “married filing separately.” You must choose to file either “head of household” or “single.” In order to file head of household, which has a lower tax rate than if you file single, you must have at least one qualifying person living with you.
One issue that often becomes contentious is child exemptions, especially if the child resides primarily with one parent. The custodial parent may feel that he or she should receive the exemption, while the parent paying child support believes he or she should receive it. There are several ways to negotiate an agreement, including alternating years; however, if parents cannot agree, the court will make the decision. Additionally, it is important to note that if the noncustodial parent is entitled to take the exemption, the IRS requires that Form 8332 (Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent) is included with the return each year. If the form is not included, the IRS will reject the exemption regardless of what any court order says.
Another issue to remember is that although child support is neither tax deductible for the person who pays, nor is it taxable income for the person who receives it, spousal support is. If you receive alimony from your ex, you are required to include it as income on your tax return. If you are the person who is paying spousal maintenance, you are allowed to deduct that amount each year.
One of the advantages of contributing to an IRA is that you can take those contributions as a deduction on your tax return for the year the contributions are made. However, if you made contributions to your spouse's IRA and you are legally divorced by the end of the tax year, you cannot take those contributions.
If you have filed for divorce, or are just considering your options, please contact a skilled DuPage County divorce attorney. Call Roscich & Martel Law Firm, LLC at (630) 793-6337 for a confidential consultation.