With the deadline for filing taxes approaching, it's essential to know what changes a divorce will mean when you file this year if your divorce was finalized by Dec. 31, 2016. Even if you've always felt confident handling your taxes on your own, it may be wise to get the services of a tax professional this year. If your spouse was the one who always handled the taxes, that's even more crucial. If you shared a tax professional, as many couples do, it's time to find your own.
Most tax professionals have experience advising clients who have undergone significant life changes throughout the year, such as divorce. Following are a few of the elements of your tax return that will likely change as the result of a divorce
Your federal filing status is based on your marital status on the last day of the year. Instead of filing as married, you'll either file as single or head of household. If your children are living with you for more than half the year, you can generally file as head of household.
Your divorce settlement should specify whether you or your ex-spouse can claim your children as dependents. This can be a significant exemption amount. If no such agreement is made, the custodial parent generally gets to claim the child(ren). The exemption can be shared or traded each year, but that should be negotiated during your divorce.
If you and your spouse continue to share the mortgage on your home, that will impact how much you can deduct in mortgage interest as well as real estate taxes. The portion of the deduction you take should reflect how much you are contributing to these expenses.
If you are receiving alimony, it's important to remember that taxes aren't withheld from that. Therefore, you may need to make some estimated tax payments throughout the coming year in order to avoid a large tax bill next year. Your tax advisor can help you figure out approximately how much you should pay quarterly to offset that tax bill.
When negotiating your divorce settlement, it's essential to keep in mind not just what you want in the short run, which may be based on emotions, but what makes financial sense in the long run. That's why, in addition to an experienced Washington family law attorney, it's wise to consult financial and tax advisors during the process.
Source: WTOP, "5 things women should know about taxes after a divorce," Dawn Doebler, March 22, 2017