As tax season gets into full swing, many Colorado residents have not given proper thought to how a recent divorce could impact their tax scenario. For those who obtained the bulk of child custody rights as part of the divorce, this tax year could shake out far differently from years past. It is important to understand how a custody case can impact taxes, and to plan accordingly.
Perhaps the biggest impact that a change in custody will have on a parent's taxes involves the filing status that can be used. When a divorced parent has the bulk of custody throughout the year, he or she can often claim as head of household. That comes with multiple tax benefits, and can make a big difference on the bottom line.
Another important consideration is the ability to claim one or more children as dependents on a parent's tax return. This is an issue that should be discussed during child custody negotiations, so that both parents are on the same page on the matter. There are cases in which having the ability to claim a child as a dependent will greatly benefit one parent, while the other would receive little or no benefit. In such cases, the parents can negotiate a settlement in which one parent claims the children, while the other receives some other accommodation within the case.
When it comes to issues of child custody and taxation, Colorado parents should know that they have the right to create a custody agreement that works for their own unique set of needs. Just because the kids spend most of their time with one parent does not preclude the other parent from accessing the tax benefits by claiming them as dependents. This is just one of many custody matters that should be carefully considered during the course of a divorce or custody case.
Source: wtop.com, "5 things women should know about taxes after divorce", Dawn Doebler, March 22, 2017