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How does divorce affect my tax situation?

When contemplating divorce, many people in New York forget to consider what happens to their tax situation. Along with adjusting to new living arrangements and making the transition to singlehood, people should take a few considerations into mind so they can avoid complications.

Tax filing status

When determining a person’s tax filing status for the current tax year, the IRS uses his or her marital status “from the last day of previous year”, states Forbes.com. Spouses who file for divorce from their spouses before December 31st of the previous year or are no longer living together are either filing as head of household or single. In order for former spouses to qualify for head of household, they must have custody of their child or children for the majority of the year.

Dependents

Tax time is when spouses claim their children as dependents. Couples who are divorcing should try to come to an agreement about who can claim their children as dependents on their taxes. If they cannot agree about who should claim the kids, then the custodial parent usually claims the children. According to LearnVest.com, separating spouses should keep in mind that they can negotiate about who gets to claim the children for exemptions. But, only the custodial parent can claim the child care credit.

Income changes

Many people experience significant income changes after divorce. These changes often include receiving income from returning to work, alimony and child support payments. Changes that occur from divorce can get complicated for some people. They may need to consult with a financial advisor to make their tax situation more manageable.

Ex-spouses should make themselves aware of how their divorce changes their tax status. There are many issues that can create tax obligations and complications. With careful planning, couples can minimize the amount of changes they encounter with their taxes.

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