Do I have to pay income tax when my ex-spouse and I transfer property or pay a property settlement per the terms of our divorce decree?
No. The transfer of property (or payment of a property settlement payment) pursuant to a divorce decree is not taxable. However, you’ll want to keep in mind the future tax consequences of a subsequent sale, withdrawal, or transfer of assets that you received in a property settlement.
Does the payment or receipt of child support impact my taxes?
No. Child support is not taxed as income to the parent who receives it nor deductible by the parent who pays.
Is the amount of alimony I pay tax deductible?
Yes. Alimony, or spousal support, that is paid pursuant to a court order is tax deductible. This can also include other forms of court-ordered financial support provided to your former spouse (not child support or a property settlement payment). For example, if you are required to pay the mortgage and car insurance for your former spouse, the Internal Revenue Service may consider those payments a form of alimony and may be tax deductible. Talk to your tax advisor for more information.
Should I file a joint income tax return with my spouse during our divorce proceeding?
Consult with your tax advisor to determine the risks and benefits of filing a joint return with your spouse. Compare this with the consequences of filing your tax return separately. Discuss with your attorney any concerns you have regarding the accuracy or truthfulness of the information your spouse provides on the return. Prior to filing a joint return, try to reach an agreement with your spouse about how any tax refund or liability will be divided. If your spouse refuses to file a joint return, the court cannot force him or her to do so. However, the court may penalize your spouse for an unreasonable refusal to do so.
During and after the divorce, who gets the claim our children as dependents?
While the judge has discretion to determine which parent can claim the income tax dependency exemption(s), when child support has been ordered, the court generally will order the exemptions be shared or alternated. However, most judges will require that the payor of child support be current on any child support obligation in order to claim the exemption.