If you're going through a divorce, the last thing you may have on your mind is how the breakup will affect you and your ex-spouse on your next tax return. But whether you're structuring a property settlement, choosing how to split up retirement savings or simply figuring out what your filing status is after you part ways, we can help make the transition easier.
See Also: Tax Planning for Life's Major Events
Couples who are splitting up but not yet divorced before the end of the year still have the option of filing a joint return. It's when your divorce decree becomes final that you lose the joint return option. Your marital status as of December 31 controls your filing status. If you can't file a joint return for the year, you can file as a head of household after your divorce (and get the benefit of a bigger standard deduction and gentler tax brackets) if you had a dependent living with you for more than half the year and you paid for more than half of the upkeep for your home. If your divorce is still pending at year-end, you can either file a joint return (which is likely to save you money) or choose the married-filing-separately status.
Exemptions for Dependents
You can continue to claim your child as a dependent on your tax return if the divorce decree names you as the custodial parent. If the decree is silent on that point, you would still be considered the custodial parent — and thus eligible for the exemption — if your child lived with you for a longer period of time during the year than with your ex. (It's possible for the noncustodial parent to claim the exemption if the custodial parent signs a waiver pledging that he or she won't claim it.)
Remember, too, that if you're the parent who claims the dependent exemption, you're also the one who has the right to claim the child credit or an American Opportunity or Lifetime Learning college credit. Put another way, if you can't claim the exemption, you can't claim those credits, even if you pay the college bills.
If you continue to pay a child's medical bills after the divorce, you can include those costs in your medical expense deductions even if your ex-spouse has custody of the child and claims the dependency exemption.
You can continue to claim the child-care credit for work-related expenses you incur to care for a child under age 13, if you have custody even if your ex gets to claim the dependency exemption. But only the parent who claims a child as a dependent may claim the $1,000 child tax credit.