If you are getting ready to file your taxes for the first time after your divorce or final custody order, there are important things to consider such as the child credit, transfer taxes on real estate and retirement accounts and deductions for spousal support. Read on to see what information we’ve gathered for you.
First, we are attorneys; we are not accountants or even tax preparers. We strongly suggest you talk to the experts to make sure your tax returns are filed properly.
Child dependency and credits
The IRS code provides that the custodial parent – the one who has the child for more than half the time – may claim a minor child as a dependent and will also receive the child tax credit. With the arrival of the Tax Cuts and Jobs Act (TCJA), the custodial parent will receive a $2,000 tax credit per child. Sometimes parents will agree, or a judge will order that the non-custodial parent may claim one or more children as a dependent. If that’s the case, you’ll find such a provision in your divorce judgment or court order. If you are the non-custodial parent and you are allowed to claim one or more children on your tax return, your ex will need to sign form 8322. Ask for the signature as soon as possible because filing a motion to ensure compliance or requiring your ex-spouse to amend his or her tax filings will likely be time consuming and costly.
Only the custodial parent can claim daycare expenses for a child under the age of 13 – even if a court order provides that the non-custodial parent may claim the child as a dependent.
If your divorce judgment was finalized in 2018 or earlier, you may continue claiming spousal support payments and the recipient or you must claim the spousal support as income. You’ll need your spouse’s social security number to claim the deduction.
Generally, you do not pay transfer taxes on property that is awarded to you in a divorce judgment. Keep in mind that if you are awarded the marital home, as a couple you received a $500,000 exemption from capital gains when the house was sold, but as a single filer, you will only receive a $250,000 exemption.
If you were awarded a portion of your spouse’s retirement funds, you will not be taxed on the transfer of those funds to you if the transfer occurs with the entry of a domestic relations order. If you transfer the funds by cashing the retirement pay out, the IRS will require taxes to be paid on the cashed portion of plan. You will be taxes when you receive withdrawals from the retirement account.
With a divorce, many things change and the TCJA many changes as well. Talk to your accountant about your specific situation to have find out what you may or may not deduct as an expense or claim an income.