Most-Overlooked Tax Breaks for the Newly Divorced | Kiplinger

picture of wedding photo cut in halfSkip advert If you ‘re calling it quits on your marriage, add filing taxes after divorce to the long tilt of headaches you need to deal with. For starters, if you have n’t already done then, you need to file a new W-4 mannequin with your employer to adjust the amount withheld from your paycheck. But that ‘s not all…you might besides be facing alimony payments, child custody arrangements, home sales and other divorce-related issues that can affect your taxes. The last thing you need after a divorce is another trouble to deal with. therefore, to reduce your anxiety tied, here are 7 tips to make your return to single life a little more tax friendly. Although splitting up is never easy, there ‘s no cause to unnecessarily add extra stress.

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Filing Status

picture of man staring out a windowSkip advert Your marital status as of December 31 controls your filing status. then, if you split up but are n’t officially divorced before the end of the year, you can still file a joint render ( which is likely to save you money ) or choose the married-filing-separately condition for the tax return you file for the year you separate. You can besides file as forefront of family ( and get the benefit of a bigger standard tax write-off and gentle tax brackets ) if you lived apart from your spouse for the last six months of the year, file divide returns, had a dependent survive with you for more than half of the class, and paid more than half of the care for your dwelling. once you ‘re divorced, you can file as a headway of family ( if you have a dependent survive with you for more than half of the year and you pay for more than half of the sustenance for your base ) or as a single taxpayer .Skip advert

alimony Payments

picture of blocks spelling out "alimony"Skip advert You can deduct alimony you pay to an ex-spouse if the divorce agreement was in place before the end of 2018. Otherwise, it ‘s not deductible ( or taxable to the recipient ). You besides lose the tax write-off if the agreement is changed after 2018 to exclude the alimony from your former spouse ‘s income. To qualify as deductible alimony, the cash-only payments must be spelled out in your disassociate agreement. You ‘re required to report the Social Security number of your ex-spouse, excessively, so the IRS can make certain he or she reports the alimony as taxable income .Skip advert

Credits for Children

picture of father and son togetherSkip advert As a general rule, only the custodial parent ( the one the kids live with most of the class ) can claim the child tax recognition or credit for other dependents for a divorce copulate ‘s qualify children. If you ‘re filing your 2021 tax return, the child tax credit is worth up to $ 3,600 per child 5 years previous and younger, or $ 3,000 per child 6 to 17 years previous. ( however, do n’t forget that you must subtract any improvement monthly payments of the credit you received last year from the entire credit amount on your 2021 return. ) For the 2022 tax class, the credit goes back down to $ 2,000 per child 16 years previous or younger. For either class, children who are excessively old for the child tax credit may qualify for the credit for other dependents, which can be vitamin a high as $ 500 per qualifying subject. What many people do n’t know is that it ‘s perfectly legal for the noncustodial parent to claim one of these credits for a son or daughter if the other parent signs a waiver agreeing not to claim an exemption for the child on his or her return ( which means the custodial parent ca n’t claim the recognition ). form 8332 must accompany the noncustodial parent ‘s return each year he or she claims the credits for the child. This could make fiscal sense if the noncustodial rear is in a higher tax bracket .Skip advert

aesculapian Expenses of Children

picture of a mother and daughter in a doctor's officeSkip advert If you continue to pay a child ‘s checkup bills after the disassociate, you can include those costs in your medical-expense deductions even if your ex-spouse has detention of the child. medical expenses are deductible alone to the extent they exceed 7.5 % of adjust arrant income, but the child ‘s bills you pay could push you over the 7.5 % brink .Skip advert

Asset Transfers

picture of man dividing blocks representing assetsSkip advert When a disassociate settlement shifts property from one spouse to another, the recipient role does n’t pay tax on that remove. That ‘s the good newsworthiness. But it’s important to remember that the property’s tax basis shifts as well. therefore, if you get property from your x in the divorce and belated sell it, you will pay capital gains tax on all the appreciation before arsenic well as after the transportation. That ‘s why, when you ‘re splitting up property, you need to consider the tax basis a well as the value of the property. A $ 100,000 bank account is worth more to you than a $ 100,000 stock portfolio that has a footing of $ 50,000. There ‘s no tax on the former, but when you sell the stock, you will owe tax on the $ 50,000 net income .Skip advert

home Sales

picture of for sale sign in someone's lawnSkip advert If, as part of your divorce, you and your x decide to sell your dwelling, the timing can have tax consequences. normally, the law allows you to avoid tax on the foremost $ 250,000 of gain on the sale of your primary home if you have owned the home and lived there at least two years out of the last five. Married couples filing jointly can exclude up to $ 500,000. For sales after a divorce, if the biennial ownership-and-use tests are met, you and your x can each exclude up to $ 250,000 of gain on your individual returns. If the two-year tests haven’t been met, sales after a divorce can still qualify for a reduced exclusion. The limit on tax-exempt net income in this shell depends on the assign of the biennial menstruation for which the home was owned and used. If, for model, it was one year alternatively of two, you each can exclude $ 125,000 of amplification. What happens if you receive the house in the divorce settlement and sell it several years late ? then you ‘re stuck with the $ 250,000 maximum .Skip advert

IRA contribution

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by and large, a taxpayer must have earned income from a job or self-employment to qualify to contribute to an IRA. However, there’s an exception for some divorced people. taxable alimony you receive counts as compensation for the purposes of making IRA contributions. For 2022, you can contribute up to $ 6,000 to a traditional IRA or a Roth IRA, or a combination of the two. If you ‘re at least 50 years erstwhile, you can contribute an extra $ 1,000 for the class. ( The IRA contribution limits for 2022 are the same as they were for 2021. )

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