I came across an article in Time, which highlighted five important tax points for individuals who are divorcing or have divorced. A quick summary:
1. One’s filing status ( i.e. married or single) is dictated by your marital status on December 31 regardless of the date you were divorced or married during the calendar year.
2. Assets transferred as part of a divorce are not considered income and therefore no income tax is due on these distributions. However, there are potential capital gains taxes on the transfer of the marital residence.
3. The parent awarded custody through a court order claims the child(ren) as dependents on his or her tax return.
4. Alimony is tax deductible to the former spouse paying the support. But watch out. If the spouses live together after the divorce (yes this happens!), any alimony payments made during that time cannot be deducted.
5. Unlike alimony, child support is tax neutral. Paying or receiving child support has no effect on one’s taxes. It may make sense to determine if an unallocated order (consolidating child support and alimony into one order) has tax benefits under the circumstances of your case.
Read the article here: http://www.time.com/time/business/article/0,8599,2063467,00.html