While taxes may be the last thing on your mind after going through a divorce, it’s important to know the changes you will experience. You may have a different filing status, you’ll need to make decisions with your ex-partner on who gets to claim what, and how any alimony and child support payments will be treated. Continue reading to learn how to navigate your first tax season after divorce.
Filing Status
While you were married, you probably filed jointly. If your divorce is not finalized yet, you can still file a joint return or as married filing separately. Your marital status as of December 31st of the tax year you’re filing for determines your filing status. If you are divorced by the end of the filing year, you could file as head of household or single.
If you do not have dependents, you should file as single.
To qualify as head of household you must:
- Be either divorced or considered unmarried on the last day of the year.
- To be considered unmarried:
- You must file a separate tax return.
- Your spouse must not have been living in your home in the last six months of the tax year.
- You must have paid more than half of the expenses to upkeep your home.
- Your home must be the main home of your dependent for more than half of the tax year.
- You must be able to claim an exemption for the child.
- A qualifying dependent must have lived with you in your home for more than half of the tax year. If the qualifying dependent is your parent, they do not have to live with you.
- You must have paid more than half of the expenses to upkeep your home.
- To be considered unmarried:
Dependents
If a dependent lived with you for the majority of the year, you can continue to claim them on your tax return. In this case, you are qualified as the custodial parent.
- Tax Credits
If you are the custodial parent, you can also claim the child tax credit, which is up to $3,600 for 2021. If your child is in college and still a dependent, you can also claim the American Opportunity high education credit or the Lifetime Learning higher education tax credit.
As the custodial parent, you can also claim the child care credit for work-related expenses that you incur to care for a child that is under the age of 13.
- Medical Expenses
If you pay for the child’s medical expenses after getting divorced, you will be able to include those medical bills in your medical expense deduction. You do not have to be the custodial parent or claim the child as a dependent to make these deductions.
Alimony & Child Support
If you are paying alimony to your ex, you will be able to take a tax deduction for the payments you make. You will not have to itemize your deductions to receive this tax deduction. However, the IRS will not consider the payments to be alimony unless it is made in cash and required in the divorce agreement. If you are receiving alimony, you will have to pay income tax on the alimony you have received.
For child support, it is the opposite; the person who pays child support does not get a deduction and the receiver of the child support does not have to pay income tax on that money.
If you’re worried about filing your taxes correctly after going through a divorce, our advisors at Bernard R. Wolfe & Associates, Inc. can help. We will be able to walk you through the process of filing your tax return so you can get the best outcome possible. You do not want to wait until the last minute to file your taxes; contact us today to get started.
Sources:
https://www.kiplinger.com/taxes/tax-planning/604137/your-first-tax-season-after-a-divorce
https://turbotax.intuit.com/tax-tips/marriage/getting-divorced/L20NC66cf
https://www.hrblock.com/tax-center/filing/personal-tax-planning/divorce-and-taxes/