When you are facing a divorce or separation, there are many issues that you must consider. There will almost always be division of property and debt, if there is a disparity in income, then there may be alimony issues and if there are children, then custody, parenting time and child support are issues of paramount importance. With all of these potential issues there are often tax implications which must also be considered.
Filing Jointly or Individually While Divorcing?
When the parties going through a divorce have to file tax returns before the divorce is finalized they will typically file the same jointly and equally share in any refund or any deficiency that may result in the parties having to pay additional taxes. The parties can continue to file jointly until the divorce is actually finalized. In some cases, when the divorce would be finalized in the month of December or otherwise relatively close to the end of the fiscal year for most tax payers, the parties will still either agree or otherwise be ordered to equally share in the refund or deficiency. The judge will also often be willing to basically hold onto the judgment and not sign it until after the first of the year. The parties are not divorced until the judge signs the judgment and this allows the parties to file taxes jointly and utilize some of the advantages of fling the tax return as "married filing jointly" rather than having to file individual separate returns.
Who Claims the Dependency Deductions After the Divorce?
When it comes to which parent gets to claim a child as dependent for deductions purposes on his or her tax returns after the divorce is finalized, technically the parent that has more overnights with the child would be allowed to claim the deduction under the IRS rules. However, in most cases, the parties will agree to yearly alternate the deduction or the judge may order the parties to alternate yearly. If there is more than one child, then they would each take one child until only one is eligible as a deduction and then alternate yearly. The judgment will also typically include a clause that requires the payer of child support to be current in her or his obligation in order to claim the deduction. This creates some strain between federal and state law because typically the IRS rules would prevail over a state court judgment, but the judgment can be enforced in the state court and typically the party that has violated the judgment would be ordered to reimburse the party that lost out on the deduction for value of that loss.
If you or your spouse are considering filing for divorce or separating, please do not hesitate to contact us to schedule an appointment.