Tax deductions after a divorce

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Q. I’m getting divorced, and I think I will be final before the end of the year. What do I need to know? Also, how do we know who gets to deduct our two kids, and the costs for our home, which is not yet for sale?

A. There are many tax aspects associated with a divorce.

First, there’s your filing status.

The IRS says that if you are divorced under a final decree by Dec. 31, then you are considered to be unmarried for the entire year, said Cynthia Fusillo, a certified public accountant with Lassus Wherley in New Providence.

The two possible filing status options available to you are single or head of household. Single is fairly self-explanatory, so we’ll focus on head of household. Fusillo said you qualify for this filing status if you meet all of the following: You are unmarried on the last day of the year; you paid more than half the cost of keeping up a home for the year, and; a qualifying person lived with you in the home for more than half the year (special rules apply for a dependent parent but is beyond the scope of this question).

“Head of household status is attractive because the tax brackets are wider than those for singles, so it’s worth paying attention to whether you can file this way,” Fusillo said.

Only one of you will be entitled to a dependency exemption for each of your two children.

“In general, the custodial parent will be the one getting the exemptions,” she said. “However, the custodial parent may relinquish the exemptions to the former spouse by signing a release on IRS form 8332, Release of Claim to Exemption for Child by Custodial Parent and the non-custodial parent attaches this form to his/her return.”

As for the expenses related to your home, the terms of the settlement or judgment, as well as the form of property ownership, will determine this, Fusillo said.

“It is possible that even after the divorce is final, the home remains in some sort of joint ownership between the two of you,” she said. “In this case, each of you would be entitled to half the deduction for taxes and interest.”

More than likely though, Fusillo said, the home has been transferred to one of you, which means only that person gets the deductions.

The rules associated with a divorce can be quite complex and multifaceted so it is highly recommended that you consult with your tax advisor.

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This story was first posted in September 2015.

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