You may be thinking, “I don’t have time to think about taxes — I’m getting divorced.” While divorce can be overwhelming, not considering the tax implication could reduce your assets or leave you with other issues. I have seen some interesting cases. In one, a wife didn’t have the couple’s financial history and couldn’t get through the verification questions to access her Social Security account. In another, a husband had to pay over $40,000 in taxes because of poor asset allocation.
Another area of misunderstanding is the Head of Household rules. When the divorce decree says “the husband can claim the child in odd years and the wife in even,” what does that mean? Who claims head of household? Who takes the child credit? Who gets the child dependent care credit? These depend on factors including, but not limited to, where the child lives the majority of days and who pays certain bills on that home. The divorce decree provides some information but it is really the tax code that decides these deductions and credits.
Divorce and Taxes After Tax Reform, by Beth Logan, EA, offers answers to these issues and other advice to avoid financial and tax issues during and after divorce. Your divorce attorney should be working with your tax professional (Enrolled Agents are excellent tax pros) to help you land in the best post-divorce financial position. For more information on the book, go to www.DivorceAndTaxes.net.
Beth Logan, is an Enrolled Agent which is a federally licensed tax professional. When she isn’t preparing taxes or representing clients before the IRS, she teaches tax classes and writes.
