Tax Questions and Answers
By: Cristin Lowe
With tax season just around the corner, the effect your divorce will have on your tax filing is obviously going to be at the forefront of your mind. Here are some of the most common tax questions and answers:
1. Can I deduct support payments?
If you are paying spousal support, or alimony, you are entitled to deduct the full amount from your taxable income. If you are receiving support, you need to claim all of this money as income. Child support is considered paid with “post-tax dollars,” and it is therefore neither tax deductible nor tax includable. For family support, it all depends on how your orders were crafted as to whether or not your support is deductible or not.
2. Who gets to claim the kids?
In general, the person who has the primary custody of the children is free to claim the dependency exemption for all of the children, regardless of the amount of child support received. That being said, just because the custodial parent is allowed to claim all of the children does not necessarily mean that it makes the most financial sense. In California, dependency exemptions have an effect on child support. When a parent claims a child on taxes, that parent’s net income increases, and that increase has an effect on support. You will want to consult with your tax preparer to determine your best financial interests here.
3. Do we file separately or jointly?
Again, this is a question to ask your accountant. Your accountant has the ability to run the numbers both ways. It obviously makes sense to file in the way that maximizes your return. You can always agree to divide the tax return even if you file separately. If you have concerns regarding your spouse’s ethics when it comes to taxes, you will always want to file separately.