Divorce and Taxes
This blog entry regarding tax issues related to a divorce is intended to alert you to issues to think about and provide some basic information. Before you sign any tax return or take any action with respect to your federal or state income returns, please review your situation with your current tax advisor.
Change of Mailing Address
You may officially notify the I.R.S. that you have changed your mailing address from the address used on your last tax return by filing I.R.S. Form 8822.
Alimony
Spousal support or alimony is taxable to the recipient and deductible from the income of the payor if all I.R.S. requirements are met. Lump sum alimony is not deductable. For more information see Divorced or Separated Individuals - IRS's Form 504.
Child Support
Child support payments are not deductible from the income of the payor or taxable to the recipient. For more information see Divorced or Separated Individuals - IRS's Form 504.
Dependency Exemption for Minor Children
Unless specifically addressed in your Decree, generally the custodial parent will be entitled to claim the dependency exemption for the minor children on his or her income tax return. The custodial parent may execute I.R.S. Form 8332, releasing the dependency exemption to the non-custodial parent. Release of Claim to Exemption
for Child of Divorced or Separated Parents - I.R.S. Form 8332.
Property Division
Generally, there is no tax gain or loss recognized as a result of the division of property between spouses upon divorce. Thus, there may be no tax incurred by dividing the property. Nonetheless, it is important to know the basis of the property that you receive in the division of your assets. The basis is generally the cost of acquiring, and, in some cases, maintaining a capital asset. If the asset has appreciated, the person who receives that asset will be responsible for tax on the appreciation when the asset is eventually sold.
Filing Status
Unless you are married on December 31st of that year, you cannot file a joint/married tax return. In other words, if your divorce was granted on December 30, 2008, you cannot file a joint tax return for that year with your ex-spouse. You may be able to split certain tax deductions, such as the mortgage interest deduction.
Again, these tax pointers are general in nature. A qualified tax advisor can advise you or their application to your specific case.
