What you need to know about divorce and taxes

  • What you need to know about divorce and taxes

    Date : 05-09-2018 11:27

    INTRODUCTION: While going for a divorce, its relation to the payment of taxes never crosses the mind of people seeking it. And it is very obvious. Since divorce is something personal and family law related where two people are just being separated from each other and are going to live like that for the rest of their lives.

    This is where it all starts; a particular field of law never works independently but is correlated and works simultaneously with other laws. Divorce and taxes is the perfect example, how? So when a couple gets married everything changes in respect of payment of taxes like deductions, exemptions, deciding what is taxable and what is not, if couple working in the same organization, clubbing of income,  filing of joint returns etc. following are the things couple separating/divorcing should know about the relation of tax and divorce:

    • Filing status: This could be a little complex as if you have applied for a divorce and already separated but not obtained a final decree to it by 31st December, you would be considered married and will file returns accordingly. But if separated or divorced legally by 31st December you are not considered as married and file as a single head.
    • Exemptions as to children: Your divorce decree shall spell out as to which parent would claim the children exemption because both cannot. So is it is not expressly provided in the decree the parent who has custody will be granted an exemption.
    • Child care credit: Any parent who has the custody of children below the age of 13 years may claim child credit portion for care.
    • Alimony and child support: Alimony received by the spouse is taxable in his/her hands, as it is regarded as income as per tax policies. Payee can claim deductions. But child support payments do not come under heads of payment.
    • Transfer of assets/property: Transferring of property to spouse on account of separation or divorce is not taxable.

     

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