That is not a typo. Tax Day in the U.S. this year is on April 18th. And, if you divorce as of 11:59 p.m. on December 31st, you can file as single for the entire year.

Filing “single” might be better for you, and after a divorce, every cent counts. Some people may be better off filing “married jointly”, but sharing any tax savings, and sharing information with your soon-to-be Ex, may make filing “single” your choice.

Tax Penalties

I’ve written about divorce and taxes before. For example, the 2012 American Taxpayer Relief Act made permanent the Bush-era expanded standard deduction, and the expanded 15% bracket for joint filers.

But for high income earners, the 2012 law raised taxes on couples making more than $450,000, and individuals making more than $400,000. As it turns out, some couples found out they could save over $25,000 a year if they divorced.

If you could save over $25,000 a year in taxes, you could take a trip to Italy, ski Deer Valley, put a little cash away for college, and still have some mad money to spend just by divorcing and turning their marriage into a long term relationship.

There are also a lot of risks though, known and unknown. Consider how a divorce will impact your relationship. There is no fake divorce. Once the court signs the final judgment, you are divorced. IRS rules regarding your filing status have something to say.

In addition to knowing that the filing deadline to submit 2016 tax returns is Tuesday, April 18, 2017 – rather than the traditional April 15 date – Forbes Magazine has some additional tax year tips if you have divorced, or are in the process of divorcing.

Filing Status

Be sure to select the right federal tax filing status. As noted above, it’s based on whether you were married or single on the last day of the year.

If your divorce was finalized by year-end, file your taxes as a single person or, if you had a child and qualify, head of household status; head of household offers more tax advantages than filing as a single person. Otherwise, choose “married filing jointly.”

Exemptions

Claim an exemption for your child if you’re allowed. You may be eligible to lower your taxes by taking the dependent exemption for your son or daughter if you were divorced or legally separated last year. To do so, you must have been named the custodial parent in your divorce decree

Child Support

Don’t run afoul of the tax rules for child support. Neither you nor your ex can deduct child support payments you made. But child support you received isn’t taxed as income, either.

Alimony

Avoid getting tripped up by the tax rules for alimony. If your ex-spouse paid alimony – or gave you money each month to maintain your home and life – you may owe taxes on that income. Your former spouse can deduct the payments. The rules are reversed, of course, if you were the one paying alimony.

The Forbes article is here.

 

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