OK. I don't actually have tax tips from the guy who once was the world's best professional golfer and whose divorce is now final.
But the Tiger Woods and Elin Nordegren divorce can offer us mere mortals some lessons when it comes to taxes and divorce.
Since I suspected this was coming back when the PGA Tour player's extramarital extracurriculars came out (I am, after all, a wife), I wrote about Tiger, taxes and divorce back then.
You definitely can check out that earlier post, as well as my post on this topic that I just did for my Bankrate Taxes Blog, but I also wanted to hit a few of the high points again here.
Custody, and therefore dependency and exemption tax considerations, come into play. Usually the parent who has physical custody of the kids for the most time during the tax year gets to claim them as dependents. But couples can decide to share these tax claims.
Child-related tax breaks
The custody/dependency decisions also will affect who can claim the various child-related tax breaks, such as the child tax credit, child and dependent care credit and the many tax breaks offered in connection with a kid's education.
Be sure to talk with your attorney and tax adviser how your break-up settlement affects these deductions and credits.
Alimony is taxable to the ex-spouse who gets it. It's deductible by the ex who's paying it. But child support is not taxable or deductible.
Usually, the ex-wife gets the kids. And she also usually wants to keep the house in which they've grown up so that the youngsters' routines aren't disrupted so much.
But if she gets the house and then sells it as a single owner, the amount of profit she can exempt from capital gains is just $250,000 versus the $500,000 married jointly filing homeowners can exclude. So consider this before opting to keep the residence.
As I said, these are just the high points on taxes and divorce, or low if you're in the middle of dissolving your marriage.
You need to talk with your financial and tax advisers, as well as your divorce lawyer, about your specific circumstances to make sure that your final decree doesn't put you in a tax bind.
- Tiger, taxes and divorce (again)
- Tiger tales, taxes and divorce
- Jon and Kate plus 8 divorce tax tips
- Dealing with Divorce Dollars + Cents (austinwoman magazine)
- When love goes bad: Divorce and taxes
- For better or ... apparently, just better
- Taxes and Divorce, excerpt from my book The Truth About Paying Fewer Taxes
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