In Virginia, divorce not only can mean an emotional shock to a spouse, but also affects his or her finances. One principal area that affects every divorced person is taxes, especially federal income taxes and how they are affected by child support, spousal support and property division. For this reason, sitting down with a tax professional who can show a taxpayer all of the options available to him or her can ultimately lessen the individual's tax burden.
Can divorced people still file joint returns with ex-spouses? Anyone still married on the last day of the calendar year can file a joint return with a former spouse. Divorced individuals who can claim children as dependents are considered single heads of household and can take whatever tax breaks are allowed under the federal tax code.
Who can claim children on their tax returns? Regardless of custody arrangements, parents can decide between themselves who claims their children. If the higher-earning spouse makes enough to qualify to pay the Alternative Minimum Tax, then he or she can let the other parent claim the children and take a $3,950 deduction per child for the previous year. Parents responsible for their children's medical expenses can also claim them as exemptions.
How is alimony calculated? The individual who receives alimony after divorce needs to declare it as income. The person who pays alimony gets the tax deduction. The spouse who receives child support will have to pay taxes, but the payer cannot claim it as a deduction.
How can retirement funds be shared without tax penalties? Individuals who give 401(k) funds to their former spouses will face early withdrawal penalties because the funds are considered taxable income. Nonetheless, both spouses can avoid penalties if the money is transferred under a qualified domestic relations order.
Source: Forbes, "Getting Divorced? 8 Things You Must Know About Taxes," accessed on Jan. 22, 2015
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