Although tax season is still months away, many people in Colorado may already be preparing for it as best they can. Those who have undergone significant life changes -- such as the birth of a child or purchasing a new home -- might find that their taxes are significantly impacted for the better. Carefully handling property division or choosing to work as amicably as possible during a divorce can also give some people a successful tax season.
When a couple going through the divorce process is still married at the end of the year, they may still file a joint tax return even if they are divorced shortly after the New Year. This is possible because filed taxes represent the income of the previous year. Many couples may find that filing a joint tax return one last time can ensure that they are both covered by the tax benefits that most married couples enjoy.
If one party doesn't agree to file joint taxes, which can be addressed in the divorce settlement, then both returns must be filed separately under special status of a married couple that is filing separate returns. In this instance, how property division was handled comes into play. If one person was awarded the house, then he or she can get a deduction for any mortgage payments, while the other person cannot. At this point, alimony and child support may also affect what each person must claim as either income or an expense.
When a Colorado couple divorces after the calendar has rolled over to a new year, filing a joint tax return for the prior year can be beneficial, although it is understandable why some may not agree to do so. Instead, carefully considering how various aspects of property division can ultimately affect post-divorce tax filings can be important, particularly near tax season. While keeping the house or requesting a significant amount of alimony may seem beneficial in the long run, the tax cost should also be taken into account.
Source: Fox Business, "Divorce and Taxes Can Be Complicated", Bonnie Lee, Dec. 2, 2014