As Florida residents prepare to complete their divorce, taxes might be the last thing on their minds. It is important, however, to understand the tax changes that will come once one transitions from married to single. Whether positive or negative, these changes will impact the years that follow a divorce and require careful planning.
The most obvious change is in one’s marital status for filing purposes. Where most married spouses choose to file their taxes as “married,” that status will change to “single” after a divorce. For those who will assume the bulk of child rearing duties, it may be possible to file as “head of household.” It should be noted that the IRS only considers one’s marital status on the date of December 31 of the tax year in question.
For parents, it is important to discuss which party will be able to take advantage of the tax credits for each child. This should be part of the divorce negotiation process, as it can have a great deal of impact on one’s tax scenario. Only the custodial parent will have the ability to make use of the Child and Dependent Care Credit, but other tax breaks can be divided between parents, regardless of who has primary physical custody.
During the course of a Florida divorce, it is important for spouses to consider the full range of financial ramifications that will follow the end of the marriage. This includes tax considerations, which can come as a surprise to those who do not research the issue. There are decisions that can be made during divorce that can impact one’s tax obligations, either in a positive or negative manner. Knowing what those changes will be is key to structuring a divorce settlement that is fair and balanced to all involved.
Source: fool.com, “Here’s How Your Taxes Changed If You Just Got Divorced“, Dan Caplinger, Feb. 11, 2016