Many couples divorce using mediation or collaborative divorce are able to dissolve the marriage in a cooperative and respectful way that takes every member of the family into consideration.
But there is another player: What you have to remember is that there is no touchy-feeliness about divorce in the eyes of the Internal Revenue Service. Filing your tax return after your divorce the first year could be tricky and more complicated than you think.
Items to think about:
Who claims the children?
- Prior to 2009, you could specify in a divorce decree which parent could claim the dependency exemption and use the settlement agreement to back up your claim. Not any longer. Now you have to file a form 8332 titled “Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent” This must be signed by the custodial parent for use by the non-custodial parent.
What’s your filing status?
- If you are divorced on December 31, you are considered divorced the entire year. That means you would not file jointly. You may file as single or head of household depending on your circumstances.
Alimony and Child Support
- Remember that if you receive alimony, it is considered taxable income to you. If you are paying alimony, it is deductible to you. Remember that child support is not taxable or tax-deductible.
Division of Assets
- Make sure you know the cost basis of stocks, bonds, mutual funds and other securities that you receive when assets are divided up. If you sell them you will need to have this information to calculate any gain or loss from the sale.
This is just the tip of the iceberg in terms of the tax issues related to divorce. There are many more intricate pieces that are best explained by a divorce professional such as a Certified Divorce Financial Planner.
What are your objectives moving into the New Year?