Taxes After Divorce With Children

The ripple effects of divorce on taxes can be far-reaching and both lasting and recurring. Yet often glossed over during the divorce process. Clear, succinct and comprehensive summaries do not abound.

Some conceptual highlights to keep in mind:

  • Tax deductions and credits will have a greater impact to the ex-spouse with greater earnings. In the abstract, this means more benefit to parents and child collectively. Therefore, who takes these deductions and credits can be optimized to extract the maximum benefit for that collective.
  • The Internal Revenue Service expects exes to follow their divorce decrees and agreements correctly. It isn’t equipped to delve into those documents and make sure that deductions and credits are applied to the correct party.
  • This can make for a mess that will require going back to family court for a divorce judge to set right. Cooperation between exes can avoid hassles and expenses related to more litigation and dealings with the IRS.

Some practical highlights to keep in mind:

  1. The ex who pays court-ordered and/or contractually-mandated alimony gets a deduction, so the ex who receives it must include it in their income … sooner or later, with or without penalties and/or interest
  2. Unlike alimony, actual child support is tax neutral or irrelevant
  3. The dependency exemption is worth several thousand dollars … but only one parent is allowed to take it in any particular year
  4. Tax credits (child tax, earned income, dependent care), which add up cumulatively, vary in amount but, again, only one parent may claim the same credit for the same child in any particular year
  5. There is a tax credit for college expenses but that is outside the scope of child support in Florida
  6. the deductions for interest on the home mortgage and property taxes require that the taxpayer is the one who pays the expense and is an actual owner of the home

Read more in this Wall Street Journal article: Divorced Couples, Put Aside Your Differences…for the Tax Break .