Pennsylvania couples have a lot of things to consider when they're getting a divorce, including child custody, spousal support, and property division. They may not stop to think about the tax implications of changing their marital status.
First, their tax status changes to single, meaning they can no longer file a joint return. Even if their divorce is final on the last day of the year, the Internal Revenue Service considers them unmarried for the entire tax year. The new status can impact taxes owed. Annulments complicate the picture. An annulment means the couple was never married, so they will need to file amended returns for as many as three years back.
Dependents also impact a person's tax status. Generally, custodial parents get to claim the dependent exemptions, resulting in a tax break for them. If the noncustodial parent gets the exemption, a special form must be filed with the IRS. When it comes to paying alimony, the paying spouse gets the tax deduction while the receiving spouse must declare alimony as income.
Married couples may qualify for tax breaks that only one of them will still be able to get after a divorce. One is the child tax credit, and another is the mortgage interest deduction that will go to the person who gets the house.
Divorces are traumatic enough, but dealing with financial issues, including taxes, can complicate the process. People who are facing the end of their marriage may need the assistance of a family law attorney when seeking to negotiate a comprehensive settlement agreement.