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Divorce Tax Tips #2: Consider the Children

August 19th

Often, the most difficult part of divorce for many couples is the impact it may have on the children. While this can be an exceptionally trying time emotionally, it is important to also consider the effect children may have on the legalities of the divorce itself and the later filing of tax returns.

When factoring children into a divorce situation, there are several issues that may arise with regards to tax law.

Dependency Exemption

Under IRS tax regulations, the right to a dependency exemption goes solely to the custodial parent. This means that in the case of joint custody arrangements, the exemption status can get a bit murky.

In most joint custody arrangements, the exemption will go to the parent with whom the child spends the majority of his or her time. However, if the joint arrangement is truly equal, the exemption will be granted to the parent with the highest adjusted gross income.

If desired, parents can agree to alternate or transfer the dependency exemption by filing a Form 8332 with the IRS. In the case of multiple children, parents may also decide to split the children for tax reasons, so that each parent may benefit from the dependency exemption.

Child Support

Support to a former spouse through spousal maintenance or alimony is, in most cases, considered deductible. It usually will be considered income to the recipient spouse and, as such, is deductible by the paying spouse.

Spousal maintenance becomes deductible if the payments are made according to a written agreement or judgement and the spouse are no longer members of the same household. The payments must also cease upon the death of the recipient.

Unfortunately, child support is not tax deductible. Unlike spousal maintenance, the IRS values child support as tax neutral. It is not considered income to the recipient or deductible by the payor.


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