Congratulations! You’ve made it through 2020. Now that the new year has started, it's time to think about how divorce could affect your taxes in 2021. Whether you are thinking about getting divorced or are in the process, it’s important to take into account what your tax situation will be as you finalize your divorce. This will help eliminate the sticker shock you may or may not see once you file on your own for the first time. Don’t worry! C.Y. Lee Legal Group, PLLC is here to help guide you through the tough topics like alimony, child support, and child custody. In the meantime, here are three divorce tips about filing your taxes.
1. Check the Date
If you are legally divorced by December 31st, you are considered single to the IRS. Even if you were married most of the previous year, you are eligible to file as single for the new 2021 year. If you decide to file jointly with your ex-partner, there may be advantages like a much higher standard deduction but there could also be a few downsides. If you are still in the process of divorce and have decided to file together, keep in mind that you are liable for your partner's taxes regardless of who makes more. It is best to determine the best plan for yourself as you move forward. You do not want to end up in a sticky situation with the IRS if you feel like your ex-partner may not be reliable.
3. Child Dependents
Claiming your child on your taxes can be a balancing act. Typically, if you have an even number of kids, you each can split them equally. For example, if you have two kids with your ex-partner, you’d take one and your ex-partner would take the other. You may be asking yourself, what if I only have one or an odd number of kids? Well, this is where it can get a little tricky and you may have to arrange a schedule while finalizing your divorce. A good way to look at it is if you are sharing custody of one child, you can go back and forth every year. If this becomes complicated, remember that the IRS gives the right to claim a dependent to the parent who has the child more than half the time. The child will also be considered a dependent until the age of 19 or until they are 24 if they are a student.
As you may already be aware, divorce can be expensive especially if you pay child support and alimony as well. One thing to note is that you cannot claim a tax deduction for either of the two. If you are a parent receiving either, they are not counted as added income. The IRS believes that both child support and alimony are considered personal expenses because the expenses would technically be the same if your family was still together. What about divorce costs? Are they deductible? Unfortunately, they are not. These costs again are personal expenses and will sometimes take a toll on your finances.
Do not hesitate to talk to our legal team if you run into any additional questions about alimony, child custody, or child support. We are here to help. Be sure to keep a positive mindset as you start to look at your divorce finances and taxes. You are paying to find your happiness and that itself is worth every penny.