“…In this world, nothing can be said to be certain, except death and taxes.” Benjamin Franklin. Even though Benjamin Franklin’s infamous quote is over 200 years old, the sentiment still rings true today.
Taxes are inevitable and complicated. Add a divorce into the equation and tax season may become even more complicated.
The first tax season after informally parting ways or legally divorcing can be confusing and full of unknowns. As the tax filing deadline grows closer, questions may arise such as:
“Were there changes to federal tax law that could affect my family?”
“Is alimony deductible?”
“Who can claim the children on their taxes?”
“Can we split the mortgage interest deduction?”
The first place to start to answer these questions and any other questions is to seek out a Certified Public Accountant (also known as a “CPA”). A CPA can take a look at your personal finances and any agreements between the parties to determine which filing status is most beneficial to you. In order to prepare for the meeting with your CPA, we suggest preparing to answer or ask the following questions:
- If I’m recently separated, what is my filing status?
Your marital status on the last day of the tax year determines your filing status. If your marriage has not been legally dissolved by December 31st of the tax reporting year, you are technically still married and should file as such.
- My partner and I live together, do we have the same rights as married couples? Can we file jointly?
Unfortunately, no. Only a married couple can file a joint return. The IRS considers cohabiting couples “single” individuals.
- If we are unmarried, who claims the children?
If your divorce agreement does not specify who claims the children, then unmarried couples can choose who may claim each child. However, they can not claim the same child. If you have joint custody, the parent who has the child the greatest number of days during the tax year gets to claim the child as a dependent. If you do not yet have a Parenting Plan (also called a custody agreement) in place, click here to get a free template or contact our office for a consultation. It is possible to come to an agreement where you will alternate years you claim a child. If you are alternating years you claim a child make sure you complete IRS form 8332- Release/Revocation of Release of claim to Exemption for Child by Custodial Parent. This document allows a custodial parent to pass the tax exemption for a dependent child to the noncustodial parent. You can find this form at https://www.irs.gov/pub/irs-pdf/f8332.pdf .
- Who can claim Advance Child Tax Credit Payments in 2021?
While exemptions for dependents ended in 2018, whoever qualifies to claim the child will also potentially qualify for benefits, including: head of household filings status, the $2,000 child tax credit, the $500 non-child tax credit, the credit for child and dependent care expenses, and the earned income tax credit – totaling thousands of dollars in potential tax breaks. Under the American Rescue Plan of 2021, advance payments of up to half the 2021 Child Tax Credit were sent to eligible taxpayers. If you received advance payments, you can claim the rest of your credit, if eligible, when you file your 2021 tax return. Child Tax Credit is based on whoever claimed the child in the previous filing.
- Is child support deductible?
No. Child support payments are neither deductible by the payer nor taxable to the recipient. This means that when you calculate your gross income to see if you must file a tax return, you do not include child support payments received.
- Is alimony (spousal support) deductible?
Not anymore! Beginning January 2019, alimony or separate maintenance payments are not deductible from the income of the payer spouse or includable in the income of the receiving spouse if made under a divorce or separation agreement executed after December 31, 2018.
- Is my property settlement (or property transfer pursuant to a dissolution of marriage) taxable?
If your property settlement or property transfer is pursuant to a divorce decree, it is not taxable.
Get a head start for the 2022 tax season
Are you looking to get organized for the 2022 taxes season?
Did you know that charitable donations not only contribute to the greater good but can actually lower your tax liability? These donations (of either money or goods) may be deductible!
Here are some of our favorite charities that give back in a big way!
- Trevor Project- The Trevor Project is the world’s largest suicide prevention and crisis intervention organization for LGBTQ. Together, as a community, we can support those nationwide and help people know they are not alone!
- Feeding Tampa Bay- This non-profit is leading the movement to end hunger, rallying our community together to create a healthier, more capable Tampa Bay and beyond
- Grow Into You Foundation- Show your support by helping foster teens receive mentoring and coaching to give them inspiration and direction!
- Ukraine Humanitarian Relief- As the crisis in Ukraine unfolds, donations can make a huge impact in creating relief and recovery efforts for those in Ukraine and neighboring areas.
Click here for a comprehensive guide to charitable contribution deductions.
The attorneys at McCart and Tesmer can help you sort the many complexities of your family’s restructuring, from child support and everything in between. We can help you find ways to ease the discomfort by providing the knowledge and tools necessary for your journey. Visit our website to learn more about our services or call today to set up your free consultation: 813-498-2757.