What is Tax-Deductible in Divorce?
The IRS keeps us busy learning all the new tax laws that have been enacted over the years, and with these changes, it makes it hard to know what can and cannot be deducted from your 2021 tax return.
We like to share with our clients a few line items that may be deducted from their tax returns, but there are some things to keep in mind. Here are a few of them:
- To change your filing status for 2021, your divorce needed to be finalized by December 31, 2021
- If you are not legally divorced at the end of 2021, both of you can claim any dependent children
- The 2021 Child Tax credit may change your tax return depending on if you and your spouse opted to receive it
- Divorce fees, including counseling and lawyer fees, are not deductible
- If you file as head of household, you may be able to claim your children’s child care and medical expenses
It’s important to discuss your tax status with your spouse during the divorce process – doing this eliminates issues down the road after the separation is finalized and fosters transparency.
We always suggest working with a financial neutral during your collaborative divorce process – this will help both clients understand their tax liability before signing the divorce agreement.
The Collaborative Practice of San Diego is a nonprofit, multi-disciplinary referral network of independent professionals of attorneys, mental health professionals and financial advisors working together to learn, practice, and promote Collaborative processes for problem-solving and the peaceful resolution of family law issues in regard to co-parenting, with an eye toward preserving the emotional, as well as the financial and tax issues of the family.
Contact us today to learn how to develop a separation agreement that considers how your taxes will be impacted!
Note: This information is general in nature and should not be construed as legal/financial/tax/or mental health advice. You should work with your attorney, financial, mental health or tax professional to determine what will work best for your situation.
