Below are the four most
frequently asked questions to the Tran Law
Firm attorneys about taxes and divorce:
1. What
Is My Filing Status?
There are several different filing statuses
available for those going through a divorce:
-Single;
-Married; or
-Head of Household.
These different filing statuses, as well as the
decision whether to file jointly or separately with a spouse, may yield
significantly different tax liabilities. Your filing status depends on whether
you were married or single on the last day of the year. In other words, your
marital status as of December 31 of each year controls your filing status for
that entire year.
If your divorce is final any time before December
31, you can file as single or head of household for that year. Filing as head
of household offers more tax advantages, but you must meet the following
conditions to qualify:
-You must have lived apart from
your spouse for the last six months of the tax year;
-You must have paid more than half
of the cost of maintaining your home for the year; and
-You must be able to claim your
child as a dependent.
Generally, you can claim you a dependency exemption
for your child or children only if you were designated the custodial parent by
court order. When there is no such agreement or order, or when joint custody
applies, the custodial parent is the parent who has physical custody of the
child or children for most of the year.
2. Is
There A Difference Between Child Support and Spousal Support?
Spousal support, or alimony, is tax deductible to the paying spouse and taxable to the receiving spouse. Child support, on the other hand, is “tax-neutral” and is not deductible by the payer or counted as income by the recipient or the child.
3. What Are The Tax Implications of Dividing Assets In Divorce?
The division of property in a divorce is not a taxable event. When a divorce settlement shifts property from one spouse to the other, the recipient does not pay tax on that transfer. It is important to remember, however, that the transferee takes the property at the original tax basis so considerations must be made for the ultimate tax liability when the property is eventually sold. These eventual tax consequences should be considered when negotiating a divorce settlement.
4. What
Are The Tax Implications of Selling The Home In Divorce?
The tax consequences of selling a home can be quite
complex, and even more so during a divorce. The capital gains tax exemption allows you to exclude up to
$250,000 of the profit on the sale of your home from income taxes — $500,000 if
you're married filing jointly — provided you own the home and occupied it as
your primary residence for at least two of the five years prior to selling.
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