Parenting Time and Taxes

 Posted on August 09, 2016 in Divorce

If you are considering or in the process of divorce and there are kids involved, you also need to think about the tax consequences of different options regarding maintenance, child support and parenting time. To be sure, there exist some important tax considerations that may apply to divorced or divorcing parents and their children.

Filing Status

The first tax consideration to think about is your filing status. As you probably know you file your taxes during the April after the previous tax year. The key time and date to look at is December 31 at 11:59pm. If you were married at that date and time during the previous year then you need to file either “married filing jointly” or “married filing separately.” If you were divorced by then, then you can file “single” or “head of household.” You are still married until the judge issues the divorce decree. This is an important consideration and you may want to plan the date of your divorce with this in mind.

Spousal Maintenance

If one spouse pays spousal maintenance, formerly known as alimony, to the other spouse then you will need to understand the taxation scheme in regards to maintenance. The default rule is that the spouse who receives maintenance is responsible for paying the taxes on it and the person who pays maintenance can deduct it from their taxes. However, couples can make alternate arrangements to this rule but you will want to make sure that both spouses understand the tax scheme agreed upon before settling the divorce, since who pays the taxes on the money can make a big difference in terms of the value of the property that is being given.

Child Support

Child support is the opposite of spousal maintenance, in that the default rule is that the parent paying child support pays the taxes on it and therefore cannot deduct the amount of child support he or she pays. Therefore, the parent who receives child support does not claim it as income and thus does not pay taxes on it.

Child-Related Tax Credits

If both parents have parenting time with the child, who can claim the child as a dependent for tax-related purposes? The IRS allows the person who the child lives with for most of the time to claim the child as a dependent on taxes. However, if the child lives with both parents equally, then the parent with the highest adjusted gross income will get to claim the child. Couples are able to work this out amongst themselves though as the IRS provides a form each year that the parent who would normally be able to claim the exemption can fill it out to allow the other parent to have the exemption. It is important to note that if a parent waives his or her dependent claim then he or she cannot take advantage of the Earned Income Tax Credit.

Reach Out to Us for Professional Assistance

If you are thinking about divorce, you should talk to a knowledgeable divorce and tax-planning attorney to help you understand the potential tax consequences to any decisions you make. Our dedicated DuPage County family law lawyers at Davi Law Group, LLC can help you understand all the relevant tax considerations for your situation.

Sources:

https://www.irs.gov/publications/p504/ar02.html#en_US_2013_publink1000242188
https://www.irs.gov/pub/irs-pdf/f8332.pdf