The following is intended to address some of the oft-asked aspects relating to tax issues during or after a divorce. As a disclaimer, nothing in this entry is meant to provide legal advice to your particular situation. There are unique circumstances in every divorce, and the tax consequences may vary from case to case.
A. Alimony (or spousal support): As a basic rule, recipients of alimony must count the money collected as income; payors may deduct alimony payments on their yearly tax return.
The practical effect of this rule, for payors, is that it makes sense to include as much of your support obligation under the alimony umbrella as possible. That is, if you agree to a $1,000 per month alimony payment, and the child support calculator says you should pay $1,000 in child support, for tax purposes it would help to classify as much of the total support award as spousal support as possible.
B. Child Support: There are no tax consequences for child support. The recipient of child support does not include child support as income in their tax return, and the payor cannot claim a deduction for paying child support.
C. Dependency Exemption: The parent who has physical custody (defined as having more than 1/2 the overnights) is entitled to the dependency exemption. The party who is entitled to the exemption may waive that right and give it to the other parent if they wish. Certain requirements must be met to follow internal revenue standards.
D. Tax Returns: Many divorcing couples want to file joint returns in order to capture some of the financial benefits associated with doing so. Notably, you can only file jointly if you are still married on the last day of the tax year in question. In other words, even if you are separated, and the divorce papers have been served, you can still file jointly as long as the judge has not signed the divorce judgment. As always, you can choose to file separately if you so choose.
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