As a Maryland marriage comes to an end, there are a wide range of changes that will take place. Each party will have to get accustomed to their new living arrangements and begin to make financial decisions that serve their individual interests. It is easy to forget about taxes during the months leading up to a divorce, but spouses should take the time to consider how their tax obligations might change as they transition from married to single.
The most obvious change comes with one’s filing status. Most married spouses will file as married. Once a divorce has taken place, that status can change to either single or head of household. Parents who assume primary physical custody of their children can usually make use of the head of household status, which can reduce the amount of tax that is due. It is important to note that the IRS only considers one’s marital status as of December 31 of the tax year.
Another important consideration for parents is determining which party will claim shared children for tax purposes. While there are some benefits, such as the Child and Dependent Care Credit, that can only be claimed by the custodial parent, there are other exemptions and credits that either parent can claim. This is a topic that should be discussed during divorce negotiations because the tax benefits afforded to parents can make a significant difference in the taxes owed by either party.
Maryland spouses are often overwhelmed in the months leading up to their divorce. Even so, it is important to set aside the time to research the impact that divorce will have on one’s tax landscape. In some situations, the decisions made during divorce negotiations can have a great deal of impact on the tax bill for years to come. Understanding those outcomes can help one plan for the future, both during and after a divorce.
Source: fool.com, “Here’s How Your Taxes Changed If You Just Got Divorced“, Dan Caplinger, Feb. 11, 2016
