If you share children with a spouse, you will likely wonder how to take tax breaks that your children may benefit from after the court finalizes your divorce. During your marriage, you may have had little problem understanding how to claim family tax breaks on your tax form. However, the picture might seem unclear when you become a single parent.
Assuming you have an amicable enough relationship with your spouse, working out tax issues with your spouse in advance may make your co-parenting easier. The Motley Fool explains that after a divorce, different spouses may have to claim different tax breaks to benefit their family.
Tax benefits for children
Tax law provides a number of benefits to parents. At some point, you may have claimed a personal exemption as a parent of a child on your tax form to reduce your taxable income. You may also have claimed the Earned Income Tax Credit. Other tax credits for children include the Child Tax Credit and the Child and Dependent Care Tax Credit. If you have a child who attends school, you might also have claimed an education credit at some point.
Claiming tax benefits
Once your divorce is complete, you will face the question of whether you or your ex-spouse shall claim one of the aforementioned tax credits or an exemption on a tax form. The question is not always clear. Sometimes only the parent who has primary custody of a child can claim a tax break that benefits a child.
However, it is possible for a divorced couple to work out a plan for both spouses to follow. You could negotiate whether you or your spouse can take a tax break, taking into account factors like how much of your income will become subject to tax liability and whether you and your spouse will possess the greater liability. You might also determine which of you would gain more from claiming a tax break.