Divorce already carries its own set of financial challenges; how to maintain two households on one budget, how to split marital assets, and debts should be dealt with. Divorcing during tax season can come with unanticipated, yet costly consequences. This can be especially troublesome for couples who are not well-versed with the tax code.
We are not tax attorneys, and we are not in position to give specific tax advice. However, as experienced Florida divorce lawyers we have seen a few things over the years that couples may not think about as they consider divorce. We believe these tips can help in making decisions about filing taxes during divorce proceedings.
Filing status – One’s filing status (i.e. married, single or married filing separately) can affect the number of tax deductions available. Because of this, it is important to know how the different statuses can affect the amount of taxes owed (or refunded).
Taxability of maintenance payments – Under federal law, spousal maintenance payments are tax deductible by the person who pays. In the same vein, such payments are taxable income to the person receiving them. In may help in negotiating support terms to understand how the tax will affect potential payments.
Taxability of child support payments – Unlike spousal maintenance, child support payments are not tax deductible or classified as income. However, the Child Tax Credit can be a bargaining chip in support negotiations. Essentially, parties can agree to how the credit will be used each year (i.e. alternated by the parents on an odd/even year basis) to offset disputes over potential support.
For more tips and negotiating points, an experienced family law attorney can help.
Source: DailyFinance.com “Don’t Let Divorce Destroy You at Tax Time”, July 23, 2012