After your divorce is finalized, your tax obligations, credits, and the
way you file will all be affected. But the good news is that tax changes
after a divorce can be predicted and prepared for beforehand. To avoid
confusion and mistakes, make sure you are informed on how your divorce
settlement — including child custody, child support payments, and
spousal support/alimony payments — will change the way you will
file your taxes.
How to File after Divorce: Married or Single?
Even if your divorce is not finalized until December 31st, the IRS considers
you unmarried for that entire tax year. As a result, you cannot file married
tax returns for the year you get divorced.
Conversely, if you are in the process of getting a divorce at the end of
the year, but it's not final by December 31st, you generally must
file as married and should discuss with your attorney or tax professional
whether you and your spouse should file joint or separate tax returns.
In some circumstances, a still-married spouse may be able to claim a Head
of Household filing status (if you qualify) rather than have to file as
married. This, too, should be discussed with your attorney or tax professional.
Child Support is Not Taxable or Deductible
Child support received or paid will not affect your income for tax purposes.
Child support is not deductible from the income of the paying parent.
The receiving parent does not report child support payments as income.
Claiming Exemptions for your Children
After you are divorced, only one parent may claim the exemption for a dependent
child. Often, your child support order will provide which parent can claim
the exemption for your child each year. You should check your child support
order to see if you are able to claim this exemption. If you are not the
custodial parent (the parent with whom your child resides a majority of
the time), the custodial parent must sign a waiver, which you must attach
to your tax return, to allow you to claim the exemption for the child.
Child Tax Credits
The IRS treats child tax credits differently than exemptions. The following child
tax benefits and credits can only be claimed by the custodial parent:
- Child tax credit,
- Head of household filing status,
- Credit for child and dependent care expenses,
- Exclusion from income for dependent care benefits,
- Earned income credit.
Even if you can claim the exemption for your child because of a support
order which allows it, you still may not claim these additional benefits
unless you are the custodial parent. Custodial parents should keep track
of any childcare/day care expenses paid throughout the year because the
credit is limited to the amount paid directly to childcare providers.
How Spousal Support Affects Your Taxes
Spousal support, or alimony, is deductible from the income of the paying
spouse and must be reported as income by the receiving spouse. If you
pay or receive spousal support, you should keep track of the amounts paid
or received throughout the year.
A parent wishing to deduct alimony payments must remain current in his
or her child support obligations. A spouse who underpays his or her child
support obligation cannot deduct all alimony paid. This is because the
IRS disregards amounts paid as alimony to the extent there is an unpaid
child support obligation. Instead, the IRS treats that alimony as though
it were child support, thereby disallowing the alimony deduction.
Also, because of IRS recapture rules, it is important to work with your
attorney or tax professional before reaching final agreement on the amount
and duration of spousal support. Under the recapture rules, the IRS will
in some instances treat alimony payments as income to the paying spouse
rather than income to the receiving spouse. Meaning, under these circumstances,
the IRS will disallow the alimony deduction.
Other Expenses That May Qualify as Spousal Support
Occasionally, payments made to a third party for your former spouse may
also be considered alimony for tax purposes. If you pay the mortgage payments,
real estate taxes, and insurance on your family home that your spouse
lives in, and your home is jointly owned or held as tenants in common,
you may be able to deduct a portion of your payments from your income
as spousal support (and your former spouse must include an equal portion
as income). You may also be able to claim itemized deductions for the
interest and real estate taxes paid.
You should consult with your attorney or tax professional to determine
if you qualify to deduct these expenses. Read our
Divorce and Taxes: Answers to Nine Commonly-Asked Questions for additional information.
Please be advised that family law cases can be very complex and are different
for everyone, based on unique circumstances. The information provided
here should not be construed as legal advice in your case.
McKinley Irvin proudly serves Washington State and Oregon with offices
in Seattle, Bellevue, Tacoma, Puyallup, Vancouver and Portland.
Contact our family law offices to set up an appointment with a McKinley Irvin family attorney.