Divorce Season Is Coming Up As Divorce Rates Are Down This Year Vs. Last
In the early days of the pandemic there was a huge spike in divorces. People who were suddenly forced to spend time together under the same roof, just couldn’t take it. But now that we’ve all gotten used to different rhythms and some things have gotten back to a sense of normalcy, divorce rates have gone down.
Divorce Is Expensive
We’ve seen two family incomes go down to one or none. We’ve seen more women not return to work due to childcare issues. It could be that these two events may be responsible for the divorce decline. The expense of a divorce and creating two separate households, especially if children are in the picture can make couples grin and bear it so to speak.
Tax Tips For Anyone Considering Filing For Divorce
March and August are typically the busiest months for divorce. We’ll see what the upcoming month has in store. In the meantime, if you are married and are considering filing for divorce in the coming months, here are a few tips to keep in mind that may be useful when filing 2021 tax returns.
First thing to remember is that if the divorce is final by midnight of December 31, 2021 you each will be filing as single or single/head of household for the 2021 tax year.
Child Tax Credits have been lifesaving for many families. Once divorced though, as a general rule, only the parent the kids live with most of the year (the custodial parent) can claim the child tax credit or credit for other dependents for a divorced couple’s qualifying children. As you most likely already know, for 2021, the child tax credit is worth up to $3,600 per child 5 years old and younger, or $3,000 per child 6 to 17 years old. Advance payments of the credit will also be paid each month from July to December 2021. Older children may qualify for the credit for other dependents, which can be as high as $500 per qualifying dependent.
What many people don’t know is that it’s perfectly legal for the noncustodial parent to claim one of these credits for a son or daughter if the other parent signs a waiver agreeing not to claim an exemption for the child on his or her return (which means the custodial parent can’t claim the credit). Form 8332 must accompany the noncustodial parent’s return each year he or she claims the credits for the child. This could make financial sense if the noncustodial parent is in a higher tax bracket.
In addition, if you continue to pay a child’s medical bills after the divorce, you can include those costs in your medical-expense deductions even if your ex-spouse has custody of the child. Medical expenses are deductible only to the extent they exceed 7.5% of adjusted gross income, but the child’s bills you pay could push you over the 7.5% threshold.
If you sell your home or other assets are shifted from one spouse to another, there are tax implications as well. These are just a few of the topics you’ll want to consider if you are going to file for divorce this year. Good luck.