What do Family Law Attorneys Need to Know About Tax Laws for Divorced Parents?
Today’s tax laws for divorced parents aren’t really as complicated as many assume them to be. While these tax laws do make tax determinations based on the circumstances of the individual divorce and its set parameters, they are not too difficult to grasp if you have some of the facts. Here are the basics of what family law attorneys, and all others involved for that matter, should know about current tax laws for divorced parents today.
First and foremost, let’s address child support when it comes to tax laws. The often contentious matter of child support is known as a “tax neutral” payment. In other words, child support has no effect on taxes in any capacity. This holds true in all cases – divorce, marriage, single/never married, and all other situations.
Definition of Dependent
Next, the topic of dependents is definitely a very important one. A dependent is essentially another living person living dependent on a particular person. Virtually anyone can end up being a dependent, but in the case of divorce, the children are typically the primary concern.
Most confusion on this matter in divorced couples with children stems from blurred lines created by visitation. As visits or time spent with each parent accumulates, it is often viewed as dependency of the child by one parent or the other. This is far from a reliable assumption, as ultimately, the child is legally seen as dependent on who they live with and rely on most. In many cases, this is spelled out clearly within the divorce proceedings.
Alimony is yet another source of confusion for many involved in divorce. In cases where alimony is ordered by the overseeing judge, one party is essentially required to provide payments to the other as part of the conditions of the divorce. For the part of the tax-payer, alimony is not at all a bad thing. In fact, one silver lining in the often begrudged alimony order is that in the eyes of the IRS, the payer is then obligated to less tax burden. The extent to which this consideration figures in depends on the particular numbers involved.
Unfortunately, the home is one facet of taxes and the divorce which is often inherently a bit more tricky to navigate than many other factors. This is because of the way capital gains taxes are configured. Ultimately, the key thing to remember is that property transferred during the divorce, such as the home, are not subject to income taxation. However, if you do receive the house and are now single/not married, you will lose much of your tax-exempt standing on that home’s total value in gains above $250,000.
Dates and Times
Finally, date and time awareness are yet another important component to divorce and taxes which every involved attorney must be keenly aware of. It’s easy in divorce situations for parties to become confused with regard to years, percentages of years, and filings based on those time components. To cut out all of this confusion, those in-the-know simply ask if a single day of marriage status took place during the tax year in question. If the answer is yes, your marriage claim status for that year is a must. In some rare cases, however, head of household status can be used during the transition instead.
Divorce is never the easiest event in one’s life. Regardless, it doesn’t have to be as complicated as many assume when you have the facts you need about the process. In conclusion, even more guidance on the current tax laws for divorced parents can be found via the IRS online guide dedicated to the matter, found here.