Tax time is here, and many people in Maryland who ended their marriage in 2018 may wonder how they should account for their dissolution on their annual income taxes. Divorce does mean some changes to tax returns when it comes to divorce and income taxes.
If a divorced couple has children, it is necessary to determine which parent will claim the child as a dependent for tax purposes. Under Internal Revenue Service rules, only one parent can claim a child as a dependent for income tax purposes in any given year. Sometimes, if a couple has two children following a divorce, one spouse will claim one child as a dependent and the other spouse will claim the other child as a dependent. However, if a couple only has one child or has an odd number of children, they will need to decide ahead of time who will claim the children as dependents. If parents cannot come to an agreement, the IRS, in general, will allow the parent with whom the child resides with the majority of the time, that is, more than half the year, to claim the child as a dependent.
And, even though the Tax Cuts and Jobs Act did away with personal exemptions, claiming a child as a dependent may still be necessary for those who want to file as head of household or who want to qualify for the Earned Income Credit. Claiming a child as a dependent is also necessary to be eligible for the Child Tax Credit.
Also, while child support cannot be deducted by the paying spouse and does not need to be counted as income by the receiving parent, the TCJA did affect how spousal support is addressed on a person's income taxes. Unlike previous tax years, those who finalized their divorce in 2018 do not need to count spousal support as income, but spousal support is no longer tax deductible.
As this shows, the relationship between taxes and divorce can be complex, and the way a filing looks while a person is married may be very different once the person divorces.