First Wives World readers going through a split may find information from a tax attorney who specializes in divorce very helpful. Her tips, detailing how divorce can affect your income tax, appeared in the (Lancaster, Pa.) Intelligencer Journal.
Keep in mind that each year, December 31 is "D Day," or the date determining your marital status for income tax purposes. If by December 31 you have a final divorce decree, you can file as "single" or as "head of household."
If your divorce isn't final by the last day of December, you may continue to file jointly or married, filing separately. Joint filing will result in lower taxes but there's a downside, because you remain liable for your spouse's taxes if he/she doesn't pay. IRS rules are a bit complicated but we'll try to simplify them here:
For head of household, there are three requirements:
1. During the year, you've paid for more than half of your home's upkeep.
2. The home was your and your children's principal home for more than half the year.
3. Your spouse hasn't lived in the home for six months.
1. You can receive $3,400 for each child but which parent can claim dependency exemption?
2. Dependency exemption can't be split; the custodial parent where the child lives more than half the year usually gets the exemption where both parents support the child.
3. An agreement should be made as to which parent will claim the dependency exemption.
4. The custodial parent can release the exemption to the non-custodial parent.
5. Where custody hasn't been determined, the parent who pays the majority of the child's expenses and has physical custody for the majority of the year, may claim the exemption.
Child tax credit:
1. The $1,000 credit goes with the dependency exemption for parents of children under the age of 17 who qualify as your dependents.
2. You're eligible for child care credits if you paid someone to care for your children so you can work, or if you paid day care center or pre-school center fees for children under the age of 13 who are your dependents. You may get a credit for 20- to 35% of the expenses depending upon your adjusted gross income.
3. You may also receive an earned income credit if you fall in a certain income range. Calculating this credit is complicated though so you should seek IRS advice.
The tax credits are intended to help working parents and their families. But divorce can make it more difficult to take advantage of these credits and they can significantly impact your income taxes! The bottom line: Seek professional advice to take advantage of some of these credits.