Divorce & Taxations

November 06, 2020

Divorce is never a pleasant experience. It is complicated, emotional, and of course, taxing!

In addition to emotional issues, couples in divorce proceedings, have to face financial issues and no financial discussion should ever be completed without the taxation issues.

A couple in divorce proceeding has to face many taxation issues during and after their divorce. Some of them are:

  • Filing Status: The most important factor in determining filing status is if the individual is married or single on the last day of the tax year. The filing statuses are:
    • Single
    • Married Filing Joint
    • Married Filing Separate
    • Head of Household
  • Exemptions: Generally a taxpayer can claim one exemption for each person they are claiming.  Under Divorce & Separation situation, generally the “Custodial Parents” claim the exemption for their qualifying child. The non-custodial parent can claim the exemption by using Form 8332 “Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent”
  • Child Care Credit: Child Care Credit usually goes with “Custodial Parents” and non-custodial parents can’t claim it.
  • Child Support Payments: Child support payments are neither deductible nor taxable for either parent. So, the child support payments have no tax impact on the either parents.
  • Alimony:  Alimony is generally deductible for the ex-spouse who is making the payments and taxable for the ex-spouse who is receiving the payment.  There is always temptation for disguising child support and other property settlements as “Alimony”.   However, the IRS has established strict rules regarding what could be considered as “Alimony”.
  • Property: Generally, there is no tax on transferring property between the splitting couple during a divorce.

By Sal Ghulamali, CPA

He could be contacted at sg@taxcpa1.com

We are local CPA firm serving the Miramar, Pembroke Pines, and surrounding neighborhoods since 2001.

Visit our website: TAXCPA1.COM

This article is for the purpose of providing general information only. It does not provide tax/legal advice for any particular person, entity or situation. Each situation is different and you should consult a CPA/Attorney with complete and pertinent details.

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