There are many people in Montgomery, Tennessee who are recently separated or are in the midst of a divorce proceeding at the moment. Such couples should remember that once a marriage is dissolved, tax liabilities of an individual can be affected severely. Therefore, during the asset division stage of divorce proceedings, both separating spouses should be careful while claiming any property as their individual asset.
However, there are some critical areas that can help a separating spouse keep within their control, their tax liabilities and out of trouble with the Internal Revenue Service.
Prior to 2009, a custodial parent of a child could claim a dependency exemption by specifying it in the divorce decree. However, a parent can no longer make that claim and instead has to use the IRS Form 8332. According to the guidelines, the deduction for each child can be $3,900. The child, in this case, must be living with that parent for more than six months and should be under 19 years of age.
Another important aspect to remember is that the marital status at the end of the calendar year determines whether the taxes are to be filed as an individual or as a couple. There are possibilities of filing a return as a couple but that may not be a wise decision for a couple that has already split.
Alimony received from a former spouse is taxable; child support is not. This is an important rule that any separating spouse should remember. Based on this, they should make their decision about claiming spousal or child support.
Finally, when it comes to the division of physical assets such as a home or a vehicle, it is important to remember that the interest paid on mortgage repayment is deductible. However, if a person chooses to sell the house that he or she received as a part of the property division process, there may be significant tax liabilities awaiting that person.
Division of marital property at the time of divorce is often a very complex affair and without clear understanding to the rules and regulations issued by the IRS, separating couples may end up in financial trouble after the dissolution of marriage. Therefore, to be on the safer side, consulting a lawyer may just prove to be beneficial for them.
Source: Reuters, “What’s even worse than a divorce? For some, it’s the taxes,” Lauren Young, April 10, 2014