Getting divorced in Maryland can be a complex process, which is why it’s crucial to understand how property deductions and non-deductions get split. Doing so should help you become more informed during the process.
Standard deduction versus itemized deductions
Have you been filing tax returns separately while married? If so, both of you must itemize deductions or take the standard deduction. Typically, it’s best to take the option that’s more beneficial across both separate returns.
Deduction for IRAs
If either you or your spouse has a traditional IRA, it’s considered separate property under federal tax laws. Each of you will determine your eligibility for the traditional IRA deduction, which is based on your calculated earned income. Eligibility requirements are the same if either of you is holding a Roth IRA.
Property tax deductions
When you’re getting divorced and splitting assets, tax deductions related to real estate property are allocated based on whether it’s separate or community property. The deduction taken for property taxes and mortgage interest is split evenly if your home is owned as community property. If it is designated as separate property, you or your spouse will take the deduction depending on who owns it.
It’s also important to know that if you’re filing separate returns, only one of you can claim them as both of these are itemized deductions. The spouse not owning the property cannot claim the standard deduction in this situation.
Personalized itemized deductions
Knowing how to split deductions is also essential for personal expenses when getting divorced. If you or your spouse has personal expenses for items like college tuition or medical needs, they are deductible for the spouse paying the expense as long as they are paid from separately maintained funds.
It’s important to know more about how property deductions and non-deductions get split. This can make you more financially aware during the divorce process.