Divorce and Taxes

The dreaded "d" word. DIVORCE. One life event that no one anticipates nor wants to dwell on if you find it happening to you. There are things that need to be addressed from a tax stand point.

Five things you need to know from a tax standpoint:

1. If you live in North Carolina, the state requires you to be legally separated for one year before filing for divorce. Depending on how long you are separated and a few other factors, you can either file "Married Filing Separate" or "Single" if you feel that you cannot (or do not want to) file as you have been, "Married Filing Joint".

2. If you decide to file "Married Filing Separate", and one of you itemizes, you BOTH must itemize. Why does this matter? You could be the one that is adversely affected by this if you are not the one claiming the mortgage interest and real estate taxes that most likely bumped you to filing itemized deductions verses standard in previous years.

3. If you have children, make sure that you are in agreement on who claims them. If you are not communicating and you both claim them, the second return filed will be rejected by the IRS. It is helpful to have this included in your separation or divorce agreement so that it is clear to both of you.

4. If there are statements that are issued to both of you, you will want to discuss who will claim what (interest, dividends, mortgage interest, etc). Remember, if the statement has your social security number on it, it was reported to the IRS that way and will need to be dealt with accordingly.

5. Just as you are considered "married" for the entire year in which you actually get married for tax purposes, the same is true with divorce.

Be sure to check with your tax professional to discuss specifics of your situation.