As if it’s not enough you’re going through a divorce now, you also need to take care of your taxes in about a month.
Although this article is a good place to start educating yourself about the tax implications of divorce, I’m a divorce attorney, not an accountant, so anything you decide to do tax-wise needs to be reviewed with a qualified accountant.
Whether to file jointly
As long as you are married of December 31 of each year, you can file jointly. If your divorce is issued by the court just a day earlier, you lose the right to file jointly. Usually, filing jointly (when you and your spouse qualify) saves most married couples more money than does filing separately. You may not, however, in all cases, want to file jointly. To learn about when and when not to file jointly, click here.
Head of Household
If you cannot file a joint return because you divorced before the end of the tax year, you can file as a head of household and benefit from a bigger standard deduction and lower tax brackets, if you had a dependent living with you for more than half the year, and you paid more than half the cost of keeping up a home for the year.
Exemptions for dependents
If you have a dependent child, you can claim the child on your tax return, if the child lived with you for a greater number of overnights during the year than with your ex-spouse. If so, you are known, in tax parlance, as the custodial parent. If the child lived with each parent for an equal number of nights during the year, the custodial parent is the parent with the higher adjusted gross income.
A noncustodial parent can claim the dependent child exemption if he/she gets the custodial parent to sign IRS Form 8332.
Under the right circumstances (check with your accountant) for purposes of the medical and dental expenses deduction, each parent can include the medical expenses he or she pays for the child, even if the other parent claims the child’s dependency exemption.
You can claim the child care credit as work-related expenses for care paid for a child under age 13 if you are the custodial parent of that child, even if your ex-spouse gets to claim the dependency exemption.
Home Mortgage Interest
The home mortgage interest deduction is one of the biggest tax deductions (and so it’s often abused by opportunistic spouses in divorce too). To qualify to claim the home mortgage interest deduction, the mortgage on your home must be a secured debt on a qualified home in which you have an ownership interest, and you must file Form 1040 and itemize deductions on Schedule A of Form 1040.
Your mortgage is a secured debt if you put your home up as collateral to protect the interests of the lender. If you cannot pay the debt, your home can then serve as payment to the lender to satisfy (pay) the debt.
A “qualified home” means your main home or your second home. A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities.
The interest you pay on a mortgage on a home other than your main or second home may be deductible if the proceeds of the loan were used for business, investment, or other deductible purposes. Otherwise, it is considered personal interest and is not deductible.