Divorcing parents need to consider the effect on taxes

On Behalf of | Apr 15, 2022 | Divorce

Getting a satisfactory financial outcome in a divorce is about much more than pitting your wants and needs against your spouse’s.

If you are a parent, there are specific tax-related issues you need to consider. Understanding them can benefit you and your children rather than the IRS.

How you split payments between child support and alimony matters

The person paying child support cannot use it to reduce their taxes, but the person receiving it will need to pay tax on it. By contrast, the person paying alimony cannot use it to reduce their taxes, but the person receiving will not need to pay tax on it.

Your children can get one of you tax credits

The IRS gives you tax credits when you have children. When you live together, you can both benefit from that by claiming as a married couple. When you separate, you need to choose which of you gets this benefit.

You could alternate year by year. Or you could reach a  mutually beneficial arrangement whereby the person who can best use the tax credits claims and compensates the other parent in another way.

Your children could get one of you tax deductions

A parent with custody for more than half the year can claim an extra $6,000 in tax deductions by claiming as the head of the household rather than a single person. So, if you want to split custody 50:50, consider making it 51:49 so one of you can claim under this.

Getting help to understand all relevant financial and legal issues will be crucial to achieving the best possible outcome in your divorce.

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