Whether you get along well with your spouse or not, you may wish to put aside your differences temporarily around this time of year. Tax season is upon us, and the IRS pays very close attention to the returns filed by divorced couples to ensure that the proper taxes are being paid by both parties. Because your returns will likely be placed under the microscope, our Rhode Island divorce attorneys offer a few important tips on things to be aware of and work together on in order to make sure both of you can maximize your deductions and avoid potential mutual legal trouble.
Between the years 2011 and 2015, the IRS noted that people deducted nearly $57 billion in alimony payments from their taxes. During that same period, people claimed about $47 billion in alimony received. This $10 billion discrepancy has the returns of divorced couples under heavy scrutiny. Alimony payments that are ordered as part of the divorce agreement are tax deductible for the paying spouse, but the recipient will pay taxes on them as part of their income. If you are paying alimony, make sure you list your spouse’s social security number on your return or it will likely be rejected.
Each child who qualifies as a dependent counts as a deduction for roughly $4,000, but the trick is only one spouse can claim the dependent. If you and your spouse can work together to take turns on claiming a child as a dependent, then you can toggle it back and forth. However, it’s important to note that you must list the social security number of each child claimed and any later returns filed with the same number listed will be rejected.
Are your children attending college? The American Opportunity Credit can provide you with a tax break up to $4,000 of college expenses per child. This amount is usually reduced for single filers (and you don’t qualify if you make more than $80,000 per year), however your child themselves may be able to claim the exemption if neither parent is eligible.
Most people know they can deduct the interest they pay on their mortgage or their property taxes, but you must still have at least partial ownership in the marital home and pay expenses on it in order to qualify. Your divorced ex living there with your child does not make you eligible to claim the home for your own return. But if you and your ex choose to sell your home during a divorce, each spouse can get an exemption for up to $250,000, provided both of you were listed as partial owners and used it as your main residence for at least two years.
If you have any questions regarding divorce, including some of the tax ramifications, reach out to McIntyre Tate, LLP today. Our recognized and award-winning legal counsel has helped numerous clients across the state of Rhode Island find the solution they are seeking to dissolve their marriage. We firmly believe in experienced representation, which is why our team has more than 150 years of combined legal practice experience. We regularly appear in all Rhode Island courts, and can provide you with trustworthy, reputable counsel through every step of the process. Let us help you start the next chapter of your life in the best possible manner.
To schedule your initial consultation, call McIntyre Tate, LLP today at (401) 351-7700.