Some St. Clair Shores, Michigan, couples make it to their 20th, 30th, 40th and even 50th anniversary, realizing their sacred marriage vows to one another to stick together through good times and through bad times, through sickness and through health. Other couples seem destined to divorce before the ink is dry on their marriage license, as they discover that they are not compatible. Those who do decide to get divorced should understand the tax ramifications of doing so.
Since many divorcing couples have children, it is important to understand taxation in relation to children. The amount of child support paid by one parent to the other is not deductible for the parent paying and it is not taxable for the parent getting paid. However, the dependency exemption for children may be claimed by one parent, though, not by both. The parent who gets to claim it is usually the one with primary custody of the children.
There are conditions, which are outlined in IRS Publication 501 and IRS Publication 504. Those conditions include things like the children spending more nights at the home of one parent than the other. There are cases in which noncustodial parents are treated by the IRS as the ones who contributed more than half of the support needed, and thus able to claim the dependency exemption. The way this is addressed can significantly affect the financial situations of both parents, so it should be discussed with a qualified attorney.
The attorney can also help divorcing couples to address the tax implications of other aspects of divorce, like alimony. Alimony is treated differently from child support, and may be deductible for the one paying if it is included in the gross income of the one getting paid in accordance with IRS §71. The complexity of these matters makes it necessary for divorcing couples to share their financial details with their attorney in order to determine the most advantageous path for themselves.
Source: Forbes, "Taxes And Family Law: A Cheat Sheet Of What You Need To Know," Stephen Hicks, Sep. 08, 2017