After a divorce is finalized, tax issues can resurface annually affecting couples for years to come. If you are divorced, here are some tax issues to consider.
Are My Alimony Payments Tax Deductible?
If spousal maintenance has been awarded through a divorce or separation agreement, payments are deductible by the payer and taxable to the recipient. If you are the payer, remember that voluntary payments or goods purchased for your child such as a first car or a computer, are typically not deductible.
Are Child Support Payments Considered Income?
When it comes to child support, the payments made by the payer are not tax deductible. Payments received by the recipieant are not considered taxable income.
Who Claims the Tax Exemptions for Our Children After Divorce?
The dependent exemption is a hefty deduction for each child that qualifies as a dependent, currently $4,050. If couples agree, they can toggle this exemption back and forth from year to year in light of who will benefit the most based on their annual income.
What Tax Credits Are Available to Me to Reduce My Taxes?
Tax credits offset taxes and typically go to the spouse claiming the personal exemption for a child.
- The Child Tax Credit of $1,000 is available for those earning up to 75,000.
- For lower income workers, the Earned Income Credit is for low- to moderate-income workers, many of whom have children. The amount of EITC benefit depends on a recipient’s income and number of children.
- If you paid for the care of your child – babysitter, daycare or other – you may qualify for a tax credit of up to 35 percent of qualifying expenses of $3,000 for one child, or up to $6,000 for two or more children with no income limits.
Tax Break for a College Education
Affording college tuition is a challenge for many parents. The best tax break for college is the American Opportunity Credit, which can reduce taxes by as much as $2,500 on up to $4,000 of college expenses per child.
How Are Taxes on My Residence Handled After Divorce
Finally, you may wonder how deductions for mortgage interest and property taxes are handled when you and your spouse split. The deduction is available to the ex spouse who has full or partial ownership of the house and actually pays the expenses. If you and your spouse sold the house during your divorce and split the proceeds, each spouse may be eligible for a capital gains exemption.
Contact a Libertyville Illinois Family Law Attorney
If you are considering divorce and have questions regarding property division, child support, spousal maintenance or other family law issues, contact the Law Offices of Schlesinger & Strauss LLC at 847-680-4970.