Approximately one week from today is the deadline for filing 2010 taxes. While the Internal Revenue Service (IRS) has made great strides in introducing reforms/procedures designed to make computing taxes easier, it can still prove to be a rather complex process. For example, while the laws governing divorcing taxpayers have remained relatively stagnant, it can still prove difficult to determine what taxes/how much must be paid and by whom.
Today’s post, the first in a series, will briefly examine some important tax considerations for both divorced and divorcing couples.
Filing status and the status of your divorce
If the IRS guidelines dictate that you and your former spouse cannot file as you would otherwise want to (i.e., as a single person or as a married couple), you may consider “head of household” status.
While typically intended for single people, you might still be able to qualify for “head of household” status if you are in the middle of a divorce.
In order to qualify, you must be able to satisfy the following criteria:
- Lived separately from your former spouse for at least six months of the current tax year
- Paid over half of the expenses associated with the upkeep of your primary residence
- Claim your child as a dependent in accordance with the relevant tax rules
Please note, you will also be required to fill out and file your own tax return, even if you are still married.
Getting the house in the divorce may mean getting to pay some taxes
Under the Internal Revenue Code, if a married couple sells the home that they have both owned and used as their primary residence for two of the last five years, the first $500,000 of profit gained from a sale is not considered gross income (i.e., not taxable).
However, this amount falls to $250,000 for a single taxpayer (i.e., a spouse who receives a home in a divorce).
Accordingly, if you are planning on selling the home you once shared with your former spouse, remember that you will owe taxes if the sale of the home nets a profit of more than $250,000.
To be continued …
Stay tuned for more from our Ft. Worth family law blog …
To learn more about dissolution of marriage or life after divorce, contact an experienced legal or financial professional.
This post is for informational purposes only and is not to be construed as legal or financial advice.