A recent Investment News article reports that divorce filings spike at the beginning of a new year. Many people consider making changes for the better in their lives, and/or the lives of their children. This includes those people who have been struggling in unhealthy or unfulfilling relationships and are ready to move forward with the fresh start of the New Year. Some have experienced situations of high tension over the holidays or simply wanted to get through the holidays for the sake of the children.
Either way, making positive changes for one’s life isn’t the only thing upon which one needs to focus. Tax implications in relation to divorce proceedings are very important, and not usually the first thing on the minds of couples who are splitting.
How does divorce affect taxes?
To some it may seem obvious that the division of assets will affect how you file your taxes, but to many this concept is foreign. The following areas are some of the ways your taxes will be impacted by the divorce process:
- Which parent claims child or children for exemption
- Filing status
- Exemptions for dependents
- Medical bills and expenses
- Other tax credits
- Money paid to a former spouse
- Transferring assets (different tax effects for different types of assets)
- Selling your home (gain/reinvestment?)
- Transfer of retirement assets (tax effect upon use of that asset later
Who claims the children?
Although divorce legislation and child custody and support laws vary from state to state, the decision as to who claims which child on their taxes or when the one child of the relationship may be claimed is something that will have to be worked out between the two divorcing spouses in mediation or settlement procedures.
If there is only one child, typically parents will take turns claiming that child on the tax returns. If there is more than one child, children usually split it evenly, or again take turns year after year in such a way to make things equal. However, the relative incomes of the parties may totally change how this is done.
Our firm focuses fully on family law. Our Columbus divorce and family law attorneys can answer your questions and help you navigate the challenging waters of divorce. You can reach the Law Offices of William L. Geary by calling (614) 289-1227 to meet with an attorney as soon as possible.