Can a divorce filing affect your tax return preparation?
Although a divorcing couple may come to an agreement regarding the division of their marital property, a recent article reminds us that it can be easy to overlook the potential tax consequences of a divorce.
In fact, some of the biggest questions might arise as an individual prepares to file a tax return in the year of his or her divorce. The preliminary question is how an individual’s filing status will change. Options include married filing single, single, head of household, or even married filing jointly if the divorce was not finalized by December 31 of the year at issue. One’s tax filing status hinges, in part, on questions such as which spouse will pay more than one-half of the housing costs, which spouse will claim minor children as dependents, and whether a couple lived apart during the tax year.
Tax deductions might also be impacted by a divorce. Although the IRS generally does not allow parents to claim child support as a deduction, spousal support might be another matter, depending on the circumstances and whether the IRS’ enumerated requirements are met.
Fortunately, property transfers between spouses pursuant to a divorce generally do not trigger a taxable event. The law considers such transfers to be giving one spouse his or her share of the martial estate. The basis of property transferred to a spouse usually keeps its original value, as well.
Our law firm has extensive experience helping clients face complex property division matters in a divorce, including real estate, retirement accounts and other securities, and luxury items. To learn more about property division in Maryland during a divorce, check out our firm’s website.
Source: Accounting Today, ” Tax Alpha: The Divorce Checklist,” copyright 2015, SourceMedia