Tax Tips for Divorcees

Probably you dealt with some of the questions as you went through your separation. They run the gamut from who gets the house to alimony, child support and who can claim what deductions and credits. All these factors can increase or decrease your taxes.

The most important thing to know is that your marital status on the last day of December is what the Internal Revenue Service considers your filing status. If your divorce is final on December 31, then the IRS considers you unmarried all year.

Here are some tax tips for divorcees:

  • If your divorce was finalized by the end of the year, file your income tax as a single taxpayer.
  • You might be able to deduct part of your divorce lawyer's fees if he or she helped you with tax advice during the process.
  • If you get alimony payments from your ex, you will have to pay taxes on that income. Your former spouse can deduct those payments. If you are the one paying the support, you'll be able to deduct those payments.
  • Since alimony is considered earned income, you might be eligible to open an individual retirement account, even if you are not employed at the moment.
  • Don't forget to make your quarterly estimated tax payments to the IRS on your alimony income. Your accountant should be able to help you come up with the right amount.
  • Unlike alimony, child support is not taxed as income, and your ex can't deduct it.
  • Divorcing couples with children will need special tax planning. The Child Tax Credit, the Hope Scholarship and Lifetime Learning Credits have been available for a couple years. They're only available, however, to the parent who has custody of the child and is paying the college expenses.
  • The $500 Child Tax Credit is available for each dependent child 16 and under. Your adjusted gross income (AGI) must be $75,000 or less if you file as a single taxpayer. ( $110,000 for marrieds filing jointly)
  • To claim the $1,500 Hope Scholarship Credit for yourself or dependent student for the first two years of post-secondary education expenses, your AGI must be $40,000 or less on a single return. The credit phases out as your earnings rise to $50,000.
    ( $80,000 to 100,000 for marrieds filing jointly)
  • The Lifetime Learning Credit of up to $1,000 for educational expenses, is phased out as your income rises from $40,000 to $50,000 on single-taxpayer returns.
    ( also $80,000 to 100,000 for marrieds filing jointly)

For more help, get in touch with the American Institute of Certified Public Accountants' personal financial specialists (1-888-999-9256; pfs@aicpa.org). They are CPAs with experience in personal finance who have passed an exam sponsored by the AICPA.

For more help, get in touch with the American Institute of Certified Public Accountants' personal financial specialists. They are CPAs with experience in personal finance who have passed an exam sponsored by the AICPA. 1-888-999-9256; email: pfs@aicpa.org.

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