Steering You Toward Your Best Options

Divorce alters tax filing status and deductions

On Behalf of | Oct 4, 2017 | Divorce

When Texas couples get divorced, issues in their past likely held their attention, but a divorce entails planning a new financial life going forward. People who are divorced by the last day of the year will not be able to file taxes for that year under a married status. They will file as a single person or as head of household depending on the presence of children or other dependents. The change of filing status alters tax brackets and often eliminates deductions that were available while they were married.

Divorced parents will need to decide who gets to declare children as dependents because only one parent can benefit from the deduction. Typically, the custodial parent claims the dependents, but a settlement might grant the noncustodial parent the right. That choice requires the completion and filing of IRS Form 8332.

Tax filings also need to reflect spousal support payments. The person making payments to a former spouse may deduct the expense, and the recipient must list it as taxable income. Child support is a separate issue and allows neither for deduction or taxation of the amount. Tax regulations guide the assignment of other deductions, like the one for mortgage interest, which would go to the party who retained a family home. In general, the complexity of tax filing increases after a divorce.

Before people reach the stage of filing tax returns, other divorce legal issues, need to be navigated. An attorney could provide guidance and assistance in negotiating a comprehensive settlement agreement that covers property division and child custody, among other matters.