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Divorce season is upon us. And tax season is right behind. And if you thought extricating yourself from your marriage was tricky, just wait until you have to file your tax return, both this year and next.
Tax filings can bring out the worst in all of us, but filing taxes with an ex can be even more of a headache. So here are six quick tips for filing your taxes after a divorce.
The best advice for any situation is to be prepared, and that means doing your research. Make sure you and your soon-to-be ex are on the same page (as much as that is possible) about your finances and your filings, and make sure you review your tax filing before you submit it.
Part of being prepared comes by learning from others' mistakes. And mistakes on your taxes can mean huge legal and financial headaches. Consider the case of a man who filed a joint tax return for he and his ex, and his ex, who filed individually. The man ended up in court, trying to explain the mix-up.
Is alimony you pay tax deductible? Is alimony you receive taxable income? And what actually qualifies as alimony, as opposed to child support, property settlements, and payments that are part of a spouse's community property income?
For federal tax purposes, child support that you pay is not deductible on your federal tax return. At the same time, child support that you receive is not taxable income on a federal return. And it may help clarify what payments are specifically for child support when filing.
This might be the most important question for divorced parents to figure out. This distinction will impact child support tax issues as well, and can land both you and your ex in some legal hot water if not handled correctly. Generally this is based on who the custodial parent is, but in some instances the noncustodial parent can claim the child as a dependent for tax purposes.
Make sure you know which tax credits are available for single parents before you file this year.