As a divorce attorney, many of my clients were trying to end their marriage as 2015 ended, and for others, they started divorce proceedings as the New Year began. I encourage everyone to understand that divorce has tax ramifications. You need to be informed. So, here’s what you need to know:
1. Child Support:
If you are the parent receiving child support, it is not taxable. If you are the parent paying child support, you cannot take it as a deduction on your tax return.
2. Child’s Time Spent With You:
At one time, custody was simple. Usually, the mother obtained custody of the children and had the right to declare them as dependents on her tax return. However, today, custody is a lot more creative. Children’s time can be shared with both parents, birthdays, holidays, weekends and so on. In general, you can claim the children on your tax return if you are the parent with physical custody. If you share custody, you can agree to alternate who claims the children on your tax return from year to year.
3. Spousal Support:
If you are receiving spousal support, you normally do have to pay taxes on the amount you receive. If you are paying spousal support, it is a deduction to you. It doesn’t have to be itemized to receive the deduction. The parties can agree to do otherwise. The payments have to be pursuant to a separation agreement and cannot be considered child support.
4. Marital Status:
If your divorce takes place before December 31st this year, you may still be considered married when filing your tax return.
5. Your Home and Assets:
Getting the house in a divorce settlement is tax-free. However, capital gains tax still applies should you decide to sell your home and realize a gain. The good news is, you don’t have to pay income taxes on assets that are transferred to you during a divorce at the time of the divorce.
If you are contemplating divorce and would like to explore the tax ramifications, give me a call at (212) 734-1551.