Many divorced people can pinpoint the day they knew their marriage was over. Others might say it took years for the passion to wane. When it comes to taxes, the Internal Revenue Service relies on people to tell them when the marriage officially ended and the divorce papers were signed. Exactly how you report your divorce on your tax return can make a big difference down the road.
Perhaps the most obvious step — and for some, the most satisfying — is checking that box that specifies whether you’re single or married. Keep in mind that you can only check the “single” box after your divorce is final, even if you submitted your paperwork long ago. If you’re a parent, there’s also the head of household status to determine. This status gives you better tax deductions, and you may qualify even if you’re merely separated. You must have paid at least half of your housing expenses and lived apart from your spouse during the last six months of the year. Your dependent child must have also lived with you for more than six months of the year.
Your child’s address will also play into the exemptions you can take. Normally the parent who takes care of the child for more than half the year takes the exemption, a write-off of $3,700 per child, but former couples can ensure the other parent gets it by signing a written declaration. Child support isn’t deductible or counted as income, but when it comes to alimony, the person who pays can write off the amount and the recipient usually counts it as income.
What about your property and possessions? Texas is a community property state, which means that all marital property is defined as either community property or separate property. Community property — including debts and income acquired during the marriage — is divided evenly in the state, and you’ll need to report that income accordingly.
When it comes to retirement accounts, you may be entitled to part of your ex-spouse’s employer-sponsored plan. A qualified domestic relations order can provide you with benefits and treat them as your own, which means you won’t be taxed on that income.
All of this is generally good news if you’re getting a divorce this year. But because tax issues are often complicated even without a divorce, you may want to ask a divorce attorney or certified financial planner for assistance.
Source: Daily Finance, “Don’t Let Divorce Destroy You at Tax Time,” Dan Caplinger, July 23, 2012
- Our firm handles a wide variety of divorce issues. If you would like to learn more about our practice, please visit our Dallas divorce and property division page.