Divorce impacts every aspect of your life, including your finances. One of the biggest changes that divorce is going to cause in your life is how you figure out your annual income taxes. When you get a divorce you will need to determine what tax credits and deductions you can claim and which ones your former spouse will be legally entitled to claim.
Determining Who Gets to Claim What
During your divorce you are going to not only divide your current assets, but you will also need to decide how to divide tax credits and deductions between you and your soon-to-be former spouse. Usually the tax benefits of having kids is distributed according to how much each of you contribute to the child’s, or children’s, costs of living.
If you are the primary support of the children then you will get the majority of the tax credits and benefits assigned to you. However, if you both are equal contributors then you will need to work with your attorneys to determine who gets to claim the children as their dependents and how the tax benefits are to be divided.
Tax Credits and Benefits For Parents
There are a lot of tax programs that are designed to help make raising children a little more affordable, especially for parents in the low to moderate income brackets. There are several different types of tax credits that you can qualify for including refundable credits and non-refundable credit.
Refundable credits are tax programs that provide you with a refund if your credit is worth more than your tax liability. Non-refundable tax credits, on the other hand, are credits that will not offer you a refund if your credit exceeds your tax liability.
Before you start working with credits, you can take advantage of having children by claiming them as a dependent and by taking advantage of income adjustments that are set up to reduce your taxable income by the amount of money you paid for your child’s educational expenses. These deductions will help to reduce your taxable income before you start working with the credit programs.
Once you are ready for the second side of your 1040, you will have at least five child related credits that you can try for. These credits include: the Child Care Credit, the Child Tax Credit, Education Credits (Hope and Lifetime Learning Credits), Additional Child Tax Credit and Earned Income Credit. Some of these credits are going to be offered only to the parent that can claim a child as their dependent. However, the child care credit is open to any parent that pays for child care for their child.
Visit our www.children-and-divorce.net to get more tips for divorcing parents.