How Divorce Can Effect Your Taxes
When you are divorced, you need to be aware of the tax implications of the following:
- Alimony
- Child Support
- Dependent Exemption
- Head of Household Status
Alimony is taxable to the person who receives it and deductible to the person who pays it. Page 1 of your 1040 is where you claim it as income or take the deduction. Child support however, is neither taxable nor deductible to either party.
Only one parent may claim the child(ren) as a dependent on a tax return. Normally the custodial parent claims the child, however he or she can relinquish that claim on a Form 8332. This form allows the non-custodial parent to take the exemption for a specific tax year. A separate form must be completed for each tax year the non-custodial parent takes the exemption.
It is important to note that the custodial parent may still claim Head of Household Status, even with taking the exemption. The non-custodial parent may not use Head of Household, even if he or she is claiming the exemptions(s). The custodial parent may also still take the Child Tax Credit, Exclusion for Child Care Benefit and even qualify for the Earned Income Credit. The non-custodial parent may not take any of these.
Head of Household status has several specific requirements:
- You must be unmarried on the last day of the year.
- Your dependent must live in your house for more than half the year.
- You must have paid more than half the cost of upkeep in the home.
If you have additional questions about the effects of divorce on your income tax return, visit the IRS website or consult an Enrolled Agent or other tax professional.