It’s that time of year again…when you start receiving your tax forms and considering how you are going to file this year; how much you are going to owe Uncle Sam or if you’re lucky, receive a refund. This can be especially stressful if you have recently filed for legal separation or divorce. Do I file joint or single? Who claims the children? How does our division of assets affect my filing? If I have to file as joint (how can I make it as easy as possible with my ex?)
There are a multitude of questions and scenarios, here we will answer some of them in an attempt to making your tax season less stressful. Below we have created a guide to answer some of those questions.
Do I file joint or single?
When it comes to marriage status, in most cases, the best avenue is to go by the calendar year of your divorce. Each year, you file for the previous year; whatever your marital status is on December 31st of the previous year, would normally dictate how you would file. So if your divorce was final on January 2, 2017, when filing this year, you would have to file joint, or married filing separately, because your status was married as of December 31, 2016.
Who claims the children?
Typically the Order of Child Support will specify which parent can claim the dependents. Usually the parents will alternate the exemption; however, if for some unlikely reason this provision is not present, it can fall either way depending on a few factors. Of the two parties, the court will define a custodial parent; the custodial parent is the party that has physical custody of the child for majority of the year. The tax code will then guide parents from that point as to who can claim the child. Sometimes there are provisions in the Order of Child Support that will specifically state that if there is any unpaid child support or uninsured medical expenses for the minor children, the parent who owes this money will not be allowed to claim the exemption they were otherwise entailed to if they are current on their financial obligations to their children. In cases where both parents have an equal amount of time with the child, and your Order is silent on who claims the child you should meet with a family law attorney or CPA for guidance.
How does our division of assets affect my filing?
Married couples can realize up to $500,000 gain on their principal residence but after you’re divorced, that amount is, typically, cut in half. If you retained the residence, you may be able to use a very popular tax credit; the mortgage interest deduction; wherein, part of your mortgage payment goes to pay the principal while the other goes to cover the interest. Most of the time, mortgage interest is tax deductible, depending on the method of filing and/or total other deductions claimed.
If I have to file as joint, how can I make it as easy as possible with my ex?
Should the situation be volatile and there are still unresolved issues that could arise, it may be beneficial for you to arrange a meeting with your ex and attorney in order to discuss these concerns in a safe, public arena. Many parties choose to enlist the aid of a mediator or collaborative law practitioner to avoid unnecessary attorney fees and/or litigation.