These are the most common questions to consider when filing your taxes after a divorce.
Who claims the children as dependents?
In most cases, the parent who has physical custody claims the children, even if Dad is paying child support. But the majority of divorce decrees addresses this issue, so always check your divorce decree first to see what was ordered.
2. What are the rules for filing separately or jointly?
As long as you were married at some point during the year, even if it was only for a few days, you can file jointly (which usually has some advantages). As soon as the divorce is finalized you have to file separately. By finalized, we mean the Final Judgement and Decree has been signed, stamped and filed at the court house, this does not refer to a signed settlement agreement.
How do we report a sale of a home/capital gain or loss?
We asked our friends at Divorce Sense, LLC for advice on tax laws for selling a personal residence during the divorce process:
Former rules for gains on the sale of a personal residence (old §121 and §1034) were replaced with a $500,000 exclusion for joint filers ($250,000 for single filers), effective generally for sales after May 6, 1997. This exclusion can be used once every two years.
Two- Year Ownership & Use Requirements: The new exclusion requires a taxpayer to have owned and used the property as his or her principal residence for at least two years during the five-year period ending on the date of the sale or exchange. The exclusion is allowed each time a taxpayer who sells or exchanges a principal residence meets the eligibility requirements, but no more often than once every two years.
Married couples filing a joint return are entitled to a $500,000 exclusion where:
Either spouse meets the ownership requirement,
Both spouses meet the use requirement, and
Neither spouse has had a sale in the preceding two years subject to the exclusion.
Married couples not sharing a principal residence, but filing a joint return, are each entitled to a $250,000 exclusion. In addition, single taxpayers who marry a taxpayer who has used the exclusion within two years are allowed a $250,000 exclusion.
Note: One both spouses satisfy the eligibility requirements and two years have passed since the last exclusion was allowed to either spouse, a full $500,000 exclusion is available for the next sale or exchange of their principal residence.
Divorce Sense, LLC works with many of our clients in navigating the financial decisions before, during and after the divorce process. From simple money management to complex estate planning, Divorce Sense works closely with each client (and his or her attorney) to best represent a divorcing client’s financial interests in a compassionate and confidential environment. To schedule a meeting, please call 770-790-5050 __________________________
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