Let's face it when you are going through a divorce you are not thinking about Uncle Sam, he isn't even on the radar. However, when things settle down it's important for you to take some time to understand your new tax situation particularly if you have kids.

I have been filing my taxes for years, with the help of TurboTax. Of course I am not an accountant by any stretch of the imagination, but I have been flying solo for the past seven years or so and am happy to say I have not been audited (knock on wood).

When I started preparing my taxes it was for both my husband and I, but as the story goes we got divorced and tax filing that first year was pretty complicated. I had new tax situations to learn about and some decisions to make. 

  • What was my filing status going to be?  Taxes after Divorce: A New Set of Rules
  • Who would claim our son as a dependent?  
  • Who would get the tax credit? 
  • Would I have to pay taxes on the recent sale of our home? 

Overwhelmed by questions I couldn't answer I tasked myself with finding the answers. To make sure you are answering these questions correctly you will need to have your divorce settlement and custody agreements on hand.

Joint, Married filing separately, Head of household, Single?

Your tax filing status is determined by the status of your marriage on the last day of the year. If your divorce is final anytime before December 31, you can file as single, or head of household.

If your divorce proceedings and paperwork aren't complete by December 31, then as far as the IRS is concerned you're still married and you have to file either a joint return or married filing separately.

What status scores you the best outcome? Typically head of household, In order to file as head of household you must meet several conditions in addition to having your divorce finalized prior to December 31. 

  • You must file a separate return from your ex. 
  • You must have paid more than half of the cost of maintaining your home for the year. (For example: In my case we separated in May and I bought my own place, so I qualified as I maintained the home my son and I lived in for the majority of the year.) 
  • Your ex must not have lived in the home at all for at least the last six months of the year. 
  • You can claim a dependent that lived with you for the majority of the year. (For example: I was awarded full custody of our son with my ex receiving visitation, therefore I qualified). 

Claiming a Dependent

This is often a tricky topic for many recently divorced couples. Who gets to claim the kids as dependents to score the additional deduction?

In my case I was considered the custodial parent as our son lived with me 99% of the time and "visited" his dad. I qualified to claim the dependent deduction because our son lived with me for a longer period of time than he did with his dad.

In order for my ex to claim our son as a dependent I would have to sign a waiver saying that I won't claim our son. (This will not happen.)

Getting the Credits

If you're the parent who claims the dependent exemption, you're also the one who gets to claim some other credits that may help to improve your bottom line. 

  • Child credit. The Child Tax Credit is an important tax credit that may be worth as much as $1,000 per qualifying child depending upon your income. 
  • American Opportunity higher education credit. The American Opportunity Tax Credit modifies the existing Hope Credit for tax years 2009 and 2010 under ARRA. The credit was extended to apply for tax years 2011 and 2012 by the Tax Relief and Job Creation Act of 2010. (My son is still young so I only receive the child credit right now. I will look forward to the credit for higher education credits when he gets older. 
  • Child care credit. You may be able to claim the credit if you pay someone to care for your dependent who is under age 13 who is not able to care for himself or herself. The credit can be up to 35% of your expenses. To qualify, you must pay these expenses so you can work or look for work.  

So if you are the custodial parent you can claim these credits as well.

Sold your Marital Home

Capital-gains, the giant elephant in the room for anyone selling their home. If you and your ex sold the marital home the law allows you to avoid capital gains tax on the first $250,000 of gain on the sale of your primary home if you have owned the home and lived there at least two years out of the last five. Luckily my ex and I had owned the home for five years and well were not forced to pay the capital gains tax.

Here are a few other scenarios:

If you are still married as of December 31 and choose to file jointly you can exclude up to $500,000 as long as either one of you has owned the residence, and both used it as a primary home for at least two out of the last five years.

If you are considered divorced after December 31 and chose to file individually you and your ex can each exclude up to $250,000 of gain on your individual returns.

Filing your taxes after divorce can be tricky so be sure to understand your situation and your divorce settlement agreement. If you are not sure if you qualify for a deduction or credit be sure to contact a divorce support blog, tax professional or your attorney. Uncle Sam is not very forgiving of mistakes when it comes to his take.

How did you fare the first time you filed your taxes after your divorce?

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Suzanne CramerSuzanne Cramer   

Suzanne is a certified credit counselor and a Social Media Specialist for CareOne Debt Relief Services. Suzanne writes for Divorce, Debt and Finances and A Straight Talk on Debt. Follow Suzanne on Twitter @SuzanneCramer1  and @AskCareOne where she shares her insights on divorce and managing your finances.