If you think taxes are complicated, be prepared for the kind of complexities that will arise from tax considerations for a divorcing couple in Colorado. No matter whether your divorce is an amicable one, or promises to be contentious, it is very important that you work together with your spouse to settle tax issues. Your divorce is likely to have tax implications, but many of these can be resolved through careful planning and collaboration with your spouse.
In some cases, it is recommended that you continue to file as a married couple jointly until the divorce proceedings are complete. There are several benefits to this. When you file as separate while still married, it translates into higher tax rates, and a loss of important tax benefits, especially deductions related to the education of the children.
However, a joint return may not be recommended when there are business taxes involved. Work with your attorney, accountants, financial advisors and other professionals to understand how your tax liability will be affected by filing joint returns. In cases where there is a huge disparity in personal income of the spouses, it may make no sense to file joint returns because there are no benefits at all for you.
Also, consider which one of you will claim the children as dependents. Under Internal Revenue Service regulations, the parent with whom the child spends much more time, can claim the child as a dependent. If your child spends more than 50% of the year with you, you can claim the child as a dependent. If the child does not spent 50% of the time with you, you can also claim him or her as a dependent with the specific and express permission of the other parent.
If you’re paying child support, know that child support payments are not regarded as a deduction for you. If you’re receiving child support payments, it is not taxable either. However if you receive alimony, you may have to pay taxes on it, and if you pay alimony, you may claim payments as a deduction.
When it comes to resolving tax issues, try to look at the long-term picture. In a hostile divorce, it may be tempting to refuse to sign a joint return out of hostility, and that may lead to your spouse having to pay out more in taxes. However, actions like these only exacerbate hostilities, and drag out divorce proceedings.
Our divorce attorneys are experienced, and knowledgeable about the intricacies of divorce proceedings. Contact us for a FREE consultation today.