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How divorce affects taxes

Maryland couples who are getting a divorce should keep in mind that there will be a change in how they file their taxes as well. Marital status is determined by what a person's status was on the last day of the year, so at this point a person will either file as single or head of household depending on whether there are dependents. An annulment will require that amended returns be filed for the years of the marriage since an annulment means that the marriage never actually took place.

In general, the custodial parent is the one who is allowed to list the children as dependents. If the noncustodial parent is going to list the children, it will be necessary for that person to include Form 8332 with that year's tax return.

Alimony can be deducted by the person paying it and must be reported as income by the person who receives it. Child support does not count as alimony. The alimony itself must be named in the divorce or separation agreement or it will not be considered alimony for tax purposes. Tax benefits that were claimed by the couple can only be claimed by one person. The mortgage deduction goes to whoever owns the home, and the child tax credit can only go to one parent. A tax professional may help with more complicated issues.

The change in finances is one of the difficulties that people must adjust to after a divorce. People, and women in particular, are more vulnerable to poverty after divorce. Therefore, it is important that people are able to claim their fair share of marital property during property division. Certain types of property division may require additional documentation. For example, dividing a 401(k) requires a qualified domestic relations order to avoid taxes and penalties.

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