In addition to everything else on your mind, those going through a South Carolina divorce will unfortunately have to tackle the challenge of filing taxes. Sadly, the IRS has yet to craft a “recently divorced exemption.” In the meantime, we hope that the following tax tips for newly divorced couples is helpful to you:
The first bit of advice for those filing taxes after a divorce involves determining your filing status. Though you may think it's clear, the reality is that under some circumstances, you may have a choice of how to file. If your divorce was finalized before the end of the previous year (by December 31, 2014), then you have to file separately. If not, you may have some other options. You can choose to file married filing separately or a standard joint tax return. There can be advantages and disadvantages of both, so consult your CPA and weigh your options carefully.
Alimony and Child Support
First, child support is not viewed as taxable income. This means the person paying the child support does not get to deduct it from his or her taxes and the person receiving it does not have to report the money as income. However, alimony is usually a different story. Unless the Order setting forth the alimony amount specifically says otherwise, the person paying alimony is able to deduct this from his or her overall taxable income, while the recipient will need to report the money to the IRS and be prepared to pay the associated taxes on it.
Child Tax Credit
It is important to understand that only one person has the right to a child tax credit. Typically, the person who gets the credit is the primary custodian, though this is not always the case, as parents can craft agreements amongst themselves that give the benefit of the credit to the other parent.
Mortgage Interest Deduction
Another valuable tax credit is the mortgage interest deduction. Generally, if one spouse receives the home and is required to make the mortgage payments on it, that spouse will be allowed to solely claim the deduction. However, certain other situations could result in each spouse claiming a share of it, and this can vary from case to case, depending on the specific facts of each case.