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Post-divorce tax implications for divorcees to consider

As people rush to complete their taxes, a certain segment of the population, specifically those who divorced last year, may grapple with various complex tax issues, such as what should one's filing status be, division of assets, alimony, child support, and who gets to claim the kids.

Recent Florida divorcees may find it helpful to learn that when it comes to the issue of alimony, the party who receives the payment must claim it as taxable income. The party who is ordered to pay the spousal support, on the other hand, can deduct alimony payments. Nevertheless, it is essential to keep in mind that spousal support and child support are two distinct and completely different forms of support. Thus, while alimony payments are taxable income and can be deducted, child support is not taxable income and cannot be deducted.

Many recently divorced persons may also wonder into which filing status they fall. One's marital status at the end of the year determines how one will file. Thus, if one's divorce decree was finalized on December 31 of the taxable year, then even though a couple may have lived together part or most of the taxable year, they are considered to be single.

Asset division in the course of carrying out a divorce settlement can and often becomes rather complicated. Generally, mortgage interest is deductible, and only the party who gets to keep the house will be able to claim it.

When it comes to who should claim the couple's children for tax purposes, prior to 2009, all one needed to prove dependency was to have the divorce settlement agreement state which parent would have custody. Currently, though, one can no longer use an agreement for such a purpose. Instead a specific form titled "Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent," must be filled out and filed along with the tax return. More importantly, it must be signed by the custodial parent so that it can then be filed along with the tax returns of the non-custodial parent.

It is clear to many that divorce is not an easy process, and a recent divorce can affect how one's taxes are handled. An amicable breakup can be very helpful in these types of situations where a good working relationship can help get the correct paperwork from one's ex quickly and with as little hassle as possible. Nevertheless, rather than navigating the complexities surrounding divorce and taxes alone, one may want to contact a family law attorney for more information.

Source: Reuters, "What's even worse than a divorce? For some, it's the taxes," Lauren Young, April 10, 2014

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