One thing that people seeking a divorce in Pasadena often fail to account for is how ending their marriage will affect their tax liability. As the end of the year approaches, now is the time to start thinking about any divorce-related tax issues you might encounter.
First, remember that your filing status is related to your marital status on the last day of the year. If your divorce is finalized by December 31, you're considered divorced for the entire calendar year. If your paperwork is still being processed, you're still legally married. However, if you paid more than half your housing costs for the year, had a dependent child in your home for more than half the year and lived apart from your spouse during the last six months, you can claim the head of household status.
Child support is not a tax deduction for the person who pays it, nor is it considered taxable income for the person who receives it. Alimony, however, is both a tax deduction for the person who pays it and taxable income for the person who receives it.
Tax deductions for minor children generally go to the parent who lived with the child for more than half the year. If you are divorced, both parents can't claim credits for the same child. But if you and your spouse can agree who should claim the child, you can sign a written declaration giving the right to claim the child to whomever you choose.
Child care tax credits can only go to the custodial parent. These credits are phased out with higher incomes, however. Your child must also be under the age of 13 for you to claim the credit.
If you received part of your ex's retirement account benefits under a Qualified Domestic Relations Order (QDRO), the money is treated as if it came from your own retirement account. Without a QDRO, you'd be on the hook for significant tax penalizes.
To avoid any unpleasant surprises, it's smart to sit down with your accountant and discuss how your divorce will affect your tax liability before you actually file your return.
How Can We Help?
If you are in need of legal representation for your divorce, please call our office at (626) 683-8113 or email us at info@PasadenaLawOffice.com. Our team of experienced Pasadena divorce attorneys can help ensure that you receive the most favorable settlement possible.