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Health & Fitness

The Taxman Cometh!

Divorce Information NOW 

The Taxman & Divorce

It's tax time and you are in the divorce process.
We have recently received a slew of questions about taxes and how to handle them now and going forward.  Let's talk about some facts and figures about divorce and its impact on taxes

  • Unless you are still married on December 31, you are not eligible to file a joint tax return for that tax year.
  • If you are still married on December 31, you can either file jointly or singly. That is your choice.
  • Alimony is treated as taxable income for the receiving spouse.
    Alimony is a deductible expense for the paying spouse.
  • The dependent child exemption "belongs" to the primary custodial parent. The day care credit must usually stay with the parent with whom the child primarily resides. The Child Tax Credit can be claimed by anyone who is entitled to "claim a child as a dependent."
  • Transfers of property (including the marital residence) from one spouse to the other, as a result of a divorce, are generally non-taxable events. Spousal transfers, because of divorce, are treated like gifts by the IRS. To value the property for purposes of future sales the property is valued at it's baseline valuation.
  • There is still a $250,000 exclusion of capital gains per spouse on a principal residence provided that you resided in the residence for 2 out of the last 5 years (or less if you rolled in the gain from a prior principal residence). This is not a"one time" exclusion as it was under prior laws; you may apply the exclusion to one home sale in any two-year time period.
  • Spouses have individual, not joint, interest in tax refunds. Unless otherwise agreed to, the overpayment is allocated according to the amount of tax paid by each spouse.
  • "Innocent Spouse" rules allow spouses to apply to the IRS to extricate themselves from joint tax returns and to obtain protection from civil and criminal liabilities, if they suspect the other spouse has not been honest in filing in joint returns. That does not guarantee in any way that the IRS will give you that protection, however. And you should know that there are time limitations for filing the "Innocent Spouse" protection.

Of course, these are just issues for you to consider in your divorce arsenal.  Although all information has been obtained from sources believed to be reliable we urge you to rely on your accountant for tax advice specific to you.


 

 

Divorce Information NOW TM Divorce is an arena that poses huge problems for the integrity of family life, as well as family resources. Few people come to the proverbial "Divorce Table" with the appropriate information needed to work effectively with divorce professionals.

Divorce Information NOW TM helps people to be "masters of their own destiny." The company has produced DIVORCEapedia: The" WHO, WHAT, WHERE, WHEN & HOW" of Divorce, a workbook covering topics that include “Financial Information,” “Interviewing, Choosing Lawyers,” “Division of Assets,” “Marital History,” “Parenting Through the Divorce Process” and “Alimony.” 
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