If you’re going through a divorce, the last thing you want to think about is your taxes. But you may be facing a very different tax situation, and it helps to determine your strategy ahead of April 15.
For example, knowing the tax implications of child support and alimony in advance will help you to maximize your benefits.
Alimony is considered taxable income, so you’ll want to watch that it doesn’t push you into a higher tax bracket. On the other hand, child support is not taxable income and should not be reported on your return.
It can help if you are able to cooperate with your ex-to-be:
The tax exemption for children can be transferred to the noncustodial parent in exchange for increased support payments. Splitting child exemptions can be a fair way to handle this tax benefit post-divorce. Often it’s the parent with the higher adjusted gross income who will benefit; you can compare different scenarios to find the one that benefits you the most.
When children are involved, how they are claimed as exemptions on your tax return will have consequences. You can claim a child as an exemption if he is in your custody for at least six months out of the year, and receives over half of his support from you. The noncustodial parent could claim this child as an exemption only when legally separated or living apart for more than six months.
Remember, you can still file a joint return, keeping those tax benefits, while the divorce is pending, as long as you remain legally married as of December 31.