Newly divorced individuals may be able to save money on their taxes by filing for the head of household deduction. This is a status that is often negotiated in divorce settlements along with who has custody of the children and who takes possession of marital property.
To file for head of household on taxes, a parent must have a child living with them for over half the year. Parents who are in this category may also qualify for a $2,000 child tax credit each year.
Tax deductions are worth varying amounts for individuals in different tax brackets. A $2,000 tax deduction is worth $200 for a person in the 10 percent tax bracket while it is worth $600 for a person in the 30 percent tax bracket.
Parents who share joint child custody may not qualify for head of household status when they file their taxes. To qualify to file as head of household, a person must have paid for over half of a household’s expenses during the last year, they must be single, and a qualifying dependent must have lived with the taxpayer for over half of the last year.
Filing as head of household can make a significant difference for some taxpayers. In 2019, the head of household deduction is $18,350 while the standard deduction is $12,200 for single filers.
An attorney experienced in family law may be able to help individuals who are filing for divorce. Hiring an attorney might be a good idea financially because making sure that a divorce settlement is fair could save money later. An attorney may be able to advise clients about how tax changes could affect them after divorce.
Recent tax changes may affect those who get divorced in 2019 differently than they did before. For example, alimony will no longer be tax deductible for divorces finalized in 2019 and later.