Divorce and Taxes: What you Should Know this Tax Season
As Americans prepare for tax time, all the usual questions begin to mount. Should we file jointly or individually? Do I need to itemize? Can I claim that deduction? But for some Americans, the questions get even more complicated. Divorcing couples also have to think about a host of added concerns. When speaking with your divorce attorney, here are just a few things you should know, especially if you have recently gotten divorced in 2015 or are in the middle of a divorce that you anticipate will be finalized in 2016.
Should you file jointly?
First, you must consider whether you can file jointly. According to the IRS, you may only file as married filing jointly if you were still legally married as of December 31, 2015. It is irrelevant whether you were separated or in the middle of the divorce. So long as you were still legally married, you can still file jointly. If this applies to you, it may be difficult to work with an ex-spouse who you wish to avoid. If you wisely chose a collaborative divorce, you may have had the benefit of a financial expert on your team, helping you make these decisions early on. If not, ask your attorney to help initiate the conversation with your ex spouse, so that you can both minimize your taxes this year.
What if you cannot file jointly?
Even if you cannot take advantage of filing jointly as a married couple, you may be eligible to file as head of household. According the IRS Publication 501, you may be eligible for this if:
- You are not married as of the last day of 2015;
- You paid “more than half the cost of keeping up a home” for 2015; and
- A qualifying person lived with you more than half the year.
Note that a qualifying person is a spouse or dependent child. Your dependent parents do not have to live with you. By filing as head of household, you have the benefit of claiming dependents. Also keep in mind that if you were married for most of 2015, you were likely being taxed based on those dependents, such as a non-working spouse and children. Therefore, fewer taxes were likely being withheld from your pay, based on how you completed your W-4. Therefore, if you file as single, it could result in underpayment. That means owing taxes.
If filing as single, who gets to claim deductions?
If you are not able to file jointly or as head of household, you may have still shared expenses that allow deductions. Mortgage interest and dependents are the two most common deductions divorcing couples must consider when deciding who will claim the deduction.
As one of the most significant deductions most families can claim, it is important to discuss with your attorney who will claim this on their taxes. In general, it should be the person responsible for paying the mortgage. But if both spouses work and contribute financially, the analysis can get more complicated.
As usual, kids become a sticking point in divorce. However, one benefit of choosing an experienced collaborative divorce lawyer is the assistance of a team of professionals devoted to helping you and your soon-to-be ex make healthy and fair choices. Generally, it makes more sense to let the higher earning spouse claim the children, so as to reduce potential taxes. And if the higher earning spouse will be paying child support, this will make paying that support more financially viable.
If you are considering a divorce or recently got divorced and need assistance planning for tax season, consider discussing your situation with a skilled family law attorney in Orlando. Before you file your taxes, call Goodblatt · Leo for a thorough and compassionate assessment of your divorce.