Divorce Tax Preparation
Divorce and Taxes
Divorce opens up a whole new territory of legal, personal, and financial issues. Here are some things to be aware of on the tax front.
Alimony and Child Support
Alimony payments are tax deductible; child support payments are not. On the other hand, amounts received as alimony have to be included in income for tax purposes, while child support can be received tax free.
Typically, the parent who has legal custody of a child has the right to claim the dependency exemption. However, parents can agree otherwise. A custodial parent uses IRS Form 8332 to release the exemption.
Generally, the parent who claims the child as a dependent also gets the benefit of child-related tax credits, such as the child tax credit and the credit for higher education expenses.
Retirement Plan Benefits
Retirement plan benefits received from the retirement plan of a former spouse under a court-issued document called a “qualified domestic relations order” are taxable to the recipient.
Gain from the sale of a principal residence is not taxable if certain requirements are met. The tax-free ceiling is $500,000 of gain for a married couple and half that amount for a single person.
Income tax preparation becomes more complicated for divorcing individuals. If you’d like assistance, call Steven Graber at 410-466-3779. We have two offices in Baltimore to better service you. Our Baltimore CPA Accounting Firm has operated since 1993.
Graber & Associates focuses on lowering your taxes within the legal limits. Our firm specializes in IRS Tax Problem Resolution in the event that problems arise down the road.