Everybody says only two things in life are certain; the ol’ D and T. But for some Virginia men, these are not Death and Taxes, but Divorce and … Taxes.
Spoiler alert: it’s always taxes. Surprisingly, these two life events can be intertwined, and savvy divorced men can benefit from a few smart tax tips.
Dollars for Divorce
You should not — we repeat, not — be seeking a divorce because you think it will give you some financial edge. Yet, divorce can unlock some tax benefits that lead to more dollars in your pocket. For example, your legal fees could be at least partly deductible. Your children could still be exemptions for you. And payments to a spouse may be deductible. Let’s break down these and other items one at a time.
Are Legal Fees Tax Deductible?
If your attorney works on alimony or other tax-related issues connected with your divorce, those legal fees are a miscellaneous expense on your itemized tax return. You must ask your lawyer to break out the tax work on the bill from any personal work (child custody, separation agreements, etc.).
As a miscellaneous expense, those legal costs are deductible only to the extent all your miscellaneous expenses exceed 2 percent of your adjusted gross income (AGI).
Can I Claim Children After Divorce?
If you, a typical divorced Virginia Dad, are not the custodial parent (you do not have physical custody of your children), you cannot claim your children as dependents. How can this help, you ask? Because you ask your spouse to share the exemptions with you, so you both benefit.
Say you have four children, all living with their mother, your ex-wife, in your old house. She is rolling in exemptions and deductions; you have almost none, but you earn more than she does. An inducement for her to let you claim two children as dependents is the certainty of continued, prompt spousal and child support payments. She signs a waiver agreeing not to claim two of the four children on her tax return, and you claim them on yours.
What are Some Dependent Child Tax Credits?
The two children you claim as dependents also give you the claim for the child credit and various education credits:
- American Opportunity higher education credit (up to $2,500)
- Lifetime Learning higher education tax credit (up to $2,000)
A smart strategy in working all this out with your ex-wife is for you to take the two older children as dependents, and give the two younger ones to her. She is already the custodial parent of the younger children and rightly deserves credit for expenses for their care (under age 13). You may need the more immediate financial infusion, especially if you are paying spousal support, child support, and college costs.
Is Spousal Support Tax Deductible?
Sure, you might view payments to your ex-wife as a creative way to throw away $20 bills, but you can at least deduct those payments from your income. Your spouse, of course, had better be reporting them as her income.
Here your attorney is invaluable, because your lawyer can ensure the payments are spelled out in the divorce agreement, and do not take the form of “every third basket of Chesapeake Bay littleneck clams.” Payments must be in cash (check) and you have to report her Social Security number on your tax return to claim the alimony deduction.
But Wait, There’s More!
Going through your divorce, at some point you probably felt like the winner of the world’s worst game show. Experts agree that Britain’s Naked Jungle was the world’s worst game show, and we’re fairly sure you never won that, so you should feel better already.
Here are some amazing other tax breaks you can qualify for, which should cheer you up even more:
- Sell your house — If your Virginia home was yours (and your ex-wife’s) for at least two of the last five years and you both owned it, you can each exclude up to $250,000 of gain on the sale.
- Medical expenses for your children — If you continue to pay for Brenda’s beautiful braces or Eddie’s eczema treatments after the divorce, you can include those medical costs in your medical expense deduction. This is true even if your ex-spouse has physical and legal custody of Brenda and Eddie and claims the dependency exemption.
Ask Your Trusted Men’s Divorce Attorney
As Virginia attorneys representing Virginia men through their Virginia divorces, separations and child custody proceedings, we at The Firm for Men know just about everything about domestic relations law. (We know almost nothing about game shows, except that Colombia’s Nada más que la verdad — “Nothing but the Truth” — definitely needed the services of a good lawyer — one contestant confessed on air to hiring a hitman to kill her husband.) Yet we also know enough about tax law to help you solve your entangled divorce-and-taxes issues. Contact us online or call us at 757-383-9184.