I know it’s not that time of year yet but I feel compelled to talk about tax issues relating to divorce. If you’re in the process of divorce waiting until April 15th will be too late. If you’re already divorced and did not think of these issues, well again, April 15th will be too late to address it.

I urge you to consider all implications regarding your taxes before signing any documentation. I also urge you, if your case goes before a judge, to make sure to address every item in the final paperwork. Make sure that your attorney knows these are important issues to you. Left up to judges, these issues are often overlooked in the paperwork.

Items to consider during your divorce:


Who claims the children?

According to the IRS website, the custodial parent (CP) is assumed to receive the exemption unless the CP fills out form 8332. Even if your paperwork states the non-custodial parent (NCP) may take the exemption and therefore claim the child tax credit, the CP must fill out this form before the IRS will approve the deduction no matter what the paperwork says. Remember that child support is neither deducted nor claimed by either party, it is simply money passed over to the custodial parent for the needs of the child.

Is my spousal support and/or alimony taxable income?

If your alimony is spelled out and defined in your divorce decree, and is paid by your ex to you after your divorce it is taxable income to you. In some cases, this is also true during divorce proceedings. Read your paperwork carefully and see a tax professional if you are not sure. If it is part of a property settlement it may be treated differently, make sure your attorney words your legal documents in the way that you intend based on the guidelines the IRS provides. However, generally, yes, the alimony is taxable income to the recipient and it is an above the line deduction for the payer. Make sure you pay quarterly estimated taxes if you do not have a job, or have extra taken out of your paycheck if you do to avoid a huge tax bill at the end of the year.


What is your filing status?

Generally if your spouse lived away from you the last half of the year, and you have a qualifying person living with you, you provided half the care to that person, and you intend to get a divorce you can file as Head of Household. Incidentally, child support and alimony is considered your contribution to providing half the support of the qualifying person.


Other tax consequences.

Remember to consider the tax consequences of any agreement you make as it pertains to finances, property and the children during your divorce. Make sure it is spelled out; make sure it is agreeable with a qualified tax professional. Your attorney may not be qualified to make this determination. It would not hurt to hire a qualified tax professional to give you advice based on your situation.

I am not a tax professional and do not claim that my opinions here are correct. I based my views on my own personal experience with filing my personal taxes, as well as research on the IRS website.

I highly recommend reading: Publication 504 (2007), Divorced or Separated Individuals.