How does divorce affect taxes
Divorce has tax implications. When you file for a divorce, you must consult with an experienced divorce attorney to understand the impact it can have on your tax returns.
Generally a divorce will result in one spouse having to pay alimony or spousal support to the other. Generally alimony or spousal support will be included in the taxable income of the spouse receiving the payment while the spouse making the payment will be entitled to deduct the amount from his or her taxable income. However child support is not taxable nor tax deductible. The custodial parent can claim tax credit for the cost of child care up to certain amount for 2 or more children aged 13 or under.
Divorce can affect your filing status – married or single. Your status as of December 31 of the year will
determine your filing status. Generally if you are divorced as on December 31, you can file as single person. However if you have lived with your spouse as a married couple for more than six months of the year, then you must file as a married couple even if you were divorced as on December 31. If you and your spouse have filed for a divorce but your divorce petition is still pending in the court, you must file as married.
Timing of the divorce is very important while determining your tax status. If you are considering a divorce filing towards the end of the year, you should seriously consider whether you are better off getting the divorce before December 31 and filing as a single tax payer or getting the divorce in the next year and filing a joint return.Source: www.taxationlawfirms.com