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Tax Considerations of Divorce




One thing you’ll need to consider once you are divorced is how your taxes will be affected. While married, you can file a joint tax return, which affects how much you owe in taxes.

Tax Benefits of Marriage

Married couples can file a joint tax return, which offers several advantages. For one, couples with joint tax returns receive larger standard deductions that allow them to save more money.

They can qualify for multiple tax credits, including:

  • Earned Income Tax Credit

  • American Opportunity and Lifetime Learning Education Tax Credits

  • Exclusion or credit for adoption expenses

  • Child and Dependent Care Tax Credit

The reason that joint filers receive more deductions is because there is more opportunity for them to receive income. With more than one income coming in, there is more potential to qualify for these tax breaks.

When you get divorced, you and your spouse will no longer be able to file joint status. Instead, you’ll need to consider your options for tax filing status.

How to Determine Your Filing Status

If you just finalized your divorce, you shouldn’t automatically file as single. The filing status you should use will depend on when your divorce was completed. If your divorce is finalized on or before December 31st, then you will not be able to file a joint tax return. However, if your divorce becomes finalized after January 1st, you can file a joint tax return for the prior year.

If you are not able to file a joint return, you have two options. You can file as head of household or single. If you qualify, filing head of household will give you bigger tax deductions and better tax brackets over filing as single. If you do not meet the head of household requirements, you will need to file your tax return under single status.

Children and Taxes

If you have children, you and your spouse will need to determine who will claim them as a dependent on their tax return. Only one parent can claim a child on their tax return. If you have more than one child, you and your ex can each claim one if you wish. If you and your spouse cannot decide on who will claim your children, the IRS has tiebreaker guidelines to help.

If you are filing as head of household, you’ll want to claim your children. In order to qualify for head of household status, one of the requirements is that you must claim a dependent. Certain credits are worth more if you have at least one dependent. Additionally, costs associated with your children can increase some tax deductions.

Child support isn’t deducted from taxes. It is considered a personal experience since it’s the money you use to feed, clothe, and shelter your children with. This doesn’t change once you are divorced. Therefore, you cannot claim a tax deduction from it.

Speak to an Orange County Divorce Attorney

Divorce brings along many new issues to deal with, and taxes are one of them. Keeping this information in mind can help you decide the best course of action moving forward. Speaking to an Orange County divorce attorney can also benefit you. At Moshtael Family Law, we have an in-house CPA that has the enhanced ability to handle complex financial aspects of your divorce.

Call Moshtael Family Law today at (714) 909-2561 if you have questions about divorce.



 

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