One major concern for your divorce is setting yourself up for financial success. Tax breaks could help with that, but only if you know about them.
Kiplinger breaks down neglected tax breaks for the recently divorced. Give yourself financial peace of mind after your split with these tips.
Your filing status
Your divorce date affects your filing status. If you separate but do not formally divorce before December 31st, you and your current spouse may file a joint tax return. Other filling options include head of household for a larger standard deduction and married-filing-separately. Consider meeting with an accountant to determine which status benefits you the most.
Medical expenses for shared children
Will you continue paying your child’s health care expenses after the divorce? No matter if your soon-to-be-former spouse becomes the custodial parent, you may deduct medical expenses from your taxes. This only applies if health care costs surpass 7.5% of your adjusted gross income.
Child credit
Only your shared child’s custodial parent may claim the child tax credit. If you are not the custodial parent, you may claim the child tax credit if the other parent agrees to not claim the exemption. When noncustodial parents use this option, they must submit Form 8332 whenever they claim their shared child.
Asset transfers
Property recipients do not pay taxes on asset transfers. Spouses who receive property in divorce and later sell the asset must pay capital tax gains for pre-and post-transfer appreciation. You and your current partner must consider your marital property’s tax basis and value.
Researching tax breaks and credits during a divorce helps you know which moves to make. Your diligence may become essential for life after divorce.