While preparing taxes is a frustrating and annoying endeavor for many Maryland residents, the stress of tax season can be even more disruptive for those already dealing with the mental, emotional and financial problems associated with divorce. Both taxes and divorce can leave one feeling lost and overwhelmed, but individuals who take the proper steps and approach these issues with a plan can minimize their stress and handle their tax filings with ease.
Recent divorcé(e)s need to determine whether they must file as married or single. Regardless of when one divorces or how long one was married, the IRS requires taxpayers to list their marital status as of December 31 for that year’s filing. Single filers can choose between filing as “Single” or “Head of Household.” While the latter option typically comes with a lower effective tax rate, a divorced individual using this designation must live with a dependent child for at least six months of the year, lived apart from their ex-spouses for at least the second half of the tax year and contributed over 50 percent of their family’s housing expenses.
The law generally allows a divorced parent to claim a child as a dependent if he or she lives with the child for over 50 percent of year, though one may also fill out IRS Form 8332 and formally transfer that right to the other parent.
Property or money transferred from one ex-spouse to the other during a divorce’s asset distribution phase is generally not taxable, though the assets themselves are still subject to any applicable taxes if they are eventually cashed in or sold. Similarly, child support is not deductible for noncustodial parents, nor is it taxable for the parents receiving payments. However, alimony is taxed in this way, making it worthwhile for individuals receiving or paying spousal support to consult with an accountant or family law expert to learn more about how this might affect their filing with the IRS.
Source: Huffington Post, “Preparing Your Taxes In The Year of Divorce,” Kathleen B. Connell, March 21, 2013