Divorce can be emotionally and financially devastating to all involved parties. It is important for all divorcing and separating couples to understand the tax implications of financial decisions relating to divorce. State and federal tax laws address divorce with respect to income calculation, exemptions, deductions and tax credits.
Divorced or separated couples who are filing individual tax returns should be aware of how divorce may affect the amount and type of tax deductions available. For example, under the federal tax code, custodial parents may claim child tax credits and a dependent exemption of $3,950 per child for the 2014 tax year. When the custodial parent consents, the noncustodial parent may take this tax credit and tax exemption instead. Custodial parents may also claim “head of household” status which will often lower their overall tax liability. Federally filed tax returns will be rejected if both parents attempt to claim the child dependency exemption.
Some divorced or separated individuals may attempt to deduct the cost of child support. However, child support payments can neither be deducted from the person paying it nor considered taxable income to the individual receiving the payment. Child support does not get listed as income on the tax return.
Unlike child support payments, alimony payments will result in tax liability to those individuals who receive it. Alimony must be reported as taxable income. Individuals who pay alimony to their former spouses may claim those payments as a deduction on their federal tax returns.
Almost every financial decision made during the divorce process could result in a tax implication. Individuals who are planning on filing for divorce or separation should always consult an experienced divorce attorney to avoid any adverse tax consequences down the road.
Baltimore Divorce Lawyers at Huesman, Jones & Miles, LLC Work with Individuals Filing for Divorce throughout Maryland
Attempting to resolve the financial issues of your divorce without the assistance of an experienced divorce lawyer can result in unforeseen and undesirable tax consequences. The dedicated Baltimore divorce lawyers at Huesman, Jones & Miles, LLC can help you navigate the complexities of state and federal tax law implications. Our divorce lawyers will assist you in all your legal needs during the difficult process of divorce including issues relating to property distribution, alimony, child support, child custody and child visitation.
Our offices are conveniently located in Hunt Valley, Maryland to serve our divorce and family law clients throughout the greater Baltimore area including residents of Towson, Columbia, Bel Air, Essex and Westminster and throughout Baltimore County, Carroll County, Harford County and Howard County. Call Huesman, Jones & Miles, LLC today to schedule your free confidential consultation at (443) 589-0150 or submit an online inquiry form.