Before Filing Your Taxes, Know These 3 Things
In the United States, many Americans feel the stress of taxes for the entire first quarter of the year. Some prepare and file their taxes early, while others wait it out until the very last hours leading up to the end of Tax Day. While doing your taxes can create unwanted anxiety, so can hitting unexpected snags during the process, or well after you file your taxes in the form of an audit. This is what makes keeping yourself informed so important.
If you settled your divorce last year, that will have to be taken into account as you file your taxes. As this is a new situation for you, the way you handle certain aspects of your taxes will now change. A financial professional, such as a Certified Divorce Financial Analyst, will be an excellent resource as you prepare to file your taxes. As you prepare to connect with your professional, consider these three points to bring up in your discussion.
Your Filing Status
While you may finally be divorced today, your taxes could reflect otherwise. If you were legally married on the last day of the tax year for which you are filing, then you must file as such. In this situation, you may file a jointly with your former spouse or file separately as a married person. If you do file separately, you may lose the ability to file for certain deductions and credits such as the student loan interest deduction or the child and dependent care credit. Even so, filing separately might be the route you take if communication has become difficult. Speak to your divorce financial to better understand your options and decide which route is the best for you to take when filing this year.
Claiming the Kids
If you do plan to file separately as divorced individuals, you should have a plan for who will be able to claim a dependent exemption for your children. Typically, the parent who had custody over the most days during the year for which you are filing will be able to claim the children. If your situation calls for the other parent to claim the children, then the custodial parent will complete a Form 8332 to release their claim to the exemption. Again, speak to your divorce financial professional to understand if you qualify for this exemption and how best to handle it in your situation.
Upcoming Changes to Deductions
Recently, the Tax Cuts and Jobs Act has put an end to tax deductions for individuals making spousal support (or alimony) payments. However, this change does not go into effect until the beginning of next year, and those who settle their divorce before the end of 2018 will still be able to make this deduction. This change may not impact your taxes if you were divorced last year, but it could if you're currently separated and plan to settle your divorce after the end of the year.
One thing that is not going to change is the inability to deduct child support payments from taxes. Child support remains non-deductable. Discuss the timeline of your divorce with your financial professional so that you understand the impact that spousal support and child support payments could have on your financial standing.
Divorce can complicate your taxes somewhat, but having answers on these three points can help you to avoid excess stress during the filing process. If you're still looking for a divorce financial professional to work with, review our resources section where you'll find details about certified divorce financial analysts and other financial professionals in your area.