Taxes and divorce or separation: The tax rules that apply to divorce and separated individuals can be complex. In fact, the Internal Revenue Service has a 29 page publication on the subject. The publication for use in preparing your 2013 income tax returns can be found here: http://www.irs.gov/pub/irs-pdf/p504.pdf.
Most Michigan divorce lawyers get nervous when discussing the issues of taxes and divorce. While a qualified CPA is the best person to obtain tax advice, this post will discuss the major portions of IRS publication 504 – Divorced or Separated Individuals.
Your filing status can have a significant impact on your taxes. Generally speaking, married persons have certain tax advantages over single persons. If you were married or separated through December 31, you may file as married, filing a joint return or married filing a separate return. If you obtained a final divorce decree or separate maintenance (legal separation) before December 31, (the last day of the tax year) you must follow State law to determine if you are divorced or separated. For Michigan divorce or separate maintenance readers, the date of the Judgment is your Michigan divorce or Michigan separate maintenance date.
Filing a joint return may not always be the best financial decision, especially if your spouse may have a significant tax liability. If you file separate returns you should report only your own income, exemptions, deductions and credits on your individual return. You may also be able to claim itemized deductions on a separate return for certain expenses that you paid jointly, such as medical expenses paid with funds deposited into a joint checking account, state income tax paid by yourself, property taxes on the marital home and mortgage interest.
Child dependent exemptions are often a source of contention and confusion among Michigan divorce lawyers and clients. If your son, daughter, stepchild or foster child is under the age of 19 at the end of the year and under the age of 24 and a student, you may qualify for a significant tax deduction. It is important for a Michigan divorce lawyer to include in the Michigan divorce judgment a dependent child provision defining which parent is awarded the dependency exemption.
Alimony is generally deductible by the payer and taxable as income to the former spouse. However, alimony does not include child support, noncash property settlements and other uses of property. To qualify as alimony, the payments must be made in cash, and terminate upon death. Other minor requirements also apply.
Divorce and taxes can be a complicated subject and you should consult both your Michigan divorce lawyer and a competent Certified Public Accountant before filing taxes. Alternatively, the IRS provides free help in preparing your return through a network called the Volunteer Income Tax Assistance Program (www.aarp.org/money/taxaide).
About Findling Law
I have been exclusively practicing divorce and family law in Michigan for over two decades. The attorneys at Findling Law all share the core value of practicing law to help people navigate change in their lives, without compromising principles. We specialize in high socio-economic, high-profile and high-conflict cases, while also working with clients of all backgrounds. We recognize that the most important aspect of the practice of law is the application of the law to your specific circumstances.
That is why we provide more free information on divorce and family law than any other Michigan law firm. We want to help you manage your situation. Allow our exceptional legal team to help you navigate the change in your life, without compromising principles.
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By: Daniel Findling