One of the many things that will change after divorce is your taxes. You will have a separate filing status and may be in significantly different financial circumstance.
Dependency Exemptions
One thing that can change is your dependency exemptions. There are many tax breaks for parents. You can claim a dependent on your taxes to reduce your overall taxed income and take advantage of possible tax credits. Some expenses from raising a child are tax deductible, like education costs, child care needed for parental employment or medical costs.
After a divorce, it can be unclear who pays for these costs and who gets the tax breaks from them. If a parent pays spousal support and the parent receiving that support uses it for certain child related costs not covered by child support, who gets credit?
Spousal Support
Spousal support acts like regular income. Spousal support is tax deductible to the party who pays it, the payor and is taxed as income to the party that receives it, the payee. Since the payor can deduct the full amount of the spousal support, he or she cannot deduct further the child costs that come out of that support. The payee must claim all spousal support as income and then can use it for child related expenses, some of which may be write offs.
Dependent claims can go either way. There is no hard and fast rule about who gets to claim the child as a dependent, so long as only one parent does and the child qualifies as a dependent.
Generally, in cases where the child spends more overnights with one parent, the primary custodial parent, that parent has the right to claim the child as a dependent. However he or she may agree, in writing, to allow the non-custodial parent to claim the dependent is the child is a qualifying child and the other parent actually provides the financial support for the child.
You can work out another arrangement that works out for your family, so long as only one parent claims the child as a dependent each year. It is a good idea to keep this in mind when drafting parenting plans and custody agreements. Having who get the claim and when in writing is necessary and the best way to ensure there is no conflict next tax season.
Are you in the Los Angeles County area and have questions about the tax implications of your divorce? Attorney Mark H. Karney can help you identify any tax breaks you may qualify for and can ensure you the best possible financial outcome from for your divorce.
Certified Family Law Specialist, Mark H. Karney has experience handling complex and high-asset divorces in Los Angeles, Pacific Palisades and Beverley Hills areas. Contact our office at 310-564-5710; email us at intake@cfli.com or contact us through our online form to schedule a free consultation today.