MyDivorcePapers Blog

The calendar is slowly reaching April 15th, and if you are a recent divorcee, or are thinking about getting a divorce, you have a lot of thinking to do. Whoever thought marriage was a sticky situation clearly has never faced the task of untangling marital finances. But before we lose heart, let’s dive into the topic of tax deductibles and exemptions in lieu of a divorce.

Deductibles VS Exemptions

First off, lets just clear up one thing: There is a difference between a deduction and an exemption. Both deductions and exemptions decrease the amount of money you pay taxes on, thus reducing your overall taxes and possibly contributing to your tax return.

A tax deduction is an expense you paid during the year. There seems to be an infinite amount of various (and sometimes just odd) deductibles, so for safety’s sake we are leaving it at that.

A tax exemption sets aside an amount of money you don’t have to pay taxes on; tax exemptions are usually based on your marital status, family size, and state and local exemptions.

Independent, with Dependents

You’re recently divorced, and you are figuring out life as a single parent/co-parent. One would think you have enough to deal with already, but tax season stops for no one. Claiming dependents used to be fairly straightforward with sole custody rights given with visitation. But we are in a different time, a time of joint custody and all the legal entanglement that goes with it. So how do you determine who claims the kids as dependents?

If one parent is specified as the legal custodian, then that parent has won the claiming dependent battle. In cases of joint custody, if the children spend more time with one parent, that parent gets to claim the children as dependents. However, if the children spend an equal amount of time with both parents, then it becomes a point of discussion. Both parents cannot (I repeat: CANNOT) both claim the children as dependents. It’s recommended to discuss what will work best for your situation, or maybe take turns claiming the children each year.

The Taxability of Child Support

We will make this quick: Child support is not a taxable income or a tax deductible. So the child support payer cannot claim child support as a tax deduction, and the child support recipient cannot be taxed for receiving child support. Child support is deemed “tax neutral.”

Alimony Equals More Money

If you were stuck with paying alimony to your ex-spouse, at first you might have felt encumbered. But during tax season, see your alimony payments as the silver-linings they are. Not only are you helping your ex either get back on their feet, or stay on their feet, but your hard work gets you one more deductible. That’s right, an alimony payer may deduct paid alimony without itemizing deductions. Sorry, alimony recipient, your alimony usually counts as a taxable income.

But before you get carried away, there are a few conditions to meet before deducting alimony payments:

• If the spouses continued to cohabit after the divorce was finalized, any alimony payments made during that time are not deductible.
• Deductible alimony payments must be outlined in a written separation or divorce agreement, or a marital settlement agreement.
• Alimony payments must be paid in cash, check, or money order
• The alimony payments cease upon the death of the alimony recipient
• The alimony payments do not work as child support or as a part of property settlement
• The alimony payer and recipient did not file a joint tax return together.

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