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Divorce and taxes

| Sep 30, 2017 | high asset divorce

Minnesota couples who are ending their marriage should know what types of impact a divorce will have on their taxes. This knowledge can help them make necessary preparations.

If a divorce was completed by the end of the year, the Internal Revenue Service will consider the filers to be unmarried for tax purposes. This means that they will not be able to use the ‘married filing separately” or ‘married filing jointly” statuses. If there are dependents, the filers may qualify for the ‘head of household” tax bracket. If not, they will be required to file as a single person.

For individuals who obtain an annulment instead of a divorce, it will be necessary to amend the returns that were filed during marriage, as an annulment means that no marriage took place. In most situations, the open tax returns that would have to amended will mean filing at least three years of tax returns.

Whether or not divorced individuals will be able to claim their children as dependents will also be an issue. Only one parent is permitted to claim the exemption for children, which could mean a significant tax break for one parent.Generally, the custodial parent, or the parent that has physical custody of the child for the majority of the year, is entitled to the dependent exemption. However, if the divorce decree stipulates that the noncustodial parent should claim the exemption, that parent will have to include Form 8332 with his or her return. An experienced family law attorney will likely have seen these issues before and can counsel a client accordingly.

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