Pennsylvania Family Law & Taxes FAQs
No matter your current family situation - whether you are divorced, seeking custody of your child, currently receiving alimony or looking to adopt - you will encounter specific taxes that apply. To avoid trouble with the IRS and take advantage of certain credits, it is critical that you take stock of your current financial situation and speak with a dedicated family law attorney who understands these complexities on a detailed level.
Attorney Sheryl R. Rentz is well versed in the variety of codes that Pennsylvania couples with and without children often face. Call today to schedule a free consultation at (866) 290-9292.
Q: Is Alimony A Taxable Income?
A: In short, yes - but as with all tax questions involving divorce, the answer is far more complex than the question itself. According to the IRS, any alimony or maintenance paid is considered taxable income by the recipient. Taxes are obviously not taken out of the payment, which means recipients will need to calculate that extra income separately.
The individual actually making the payment can make a deduction on the taxes of the year in which it is paid. However, in order for the payment to be deductable the following must be true:
- Payment was delivered by cash, check or money order
- Nowhere was it agreed that the payment given would NOT be considered alimony
- You are no longer living in the same household as your former spouse
- The payment is not considered child support
Q: Is Child Support Taxable Income?
A: No. Child support is neither taxable nor is it able to be deducted by the payee. This is a common misconception that many spouses confuse during tax season. However, custodial parents may allow the non-custodial parent to claim their child as a dependent in order to receive a tax credit. Non-custodial parents may apply by attaching a Release/Revocation of Release of Claim to Exemption (8332 form) agreed to and signed by the custodial parent.
Q: What Is An Adoption Credit?
A: Any family or individual that successfully completes the adoption process is eligible for a federal tax credit, currently in the range of $13,000. In order to qualify, the child must be under the age of 18, and clearly incapable of self care (this includes special needs children). There are certain fees which fall under this credit as well, such as adoption and attorney, as well as travel expenses.
Q: How Should I File My Taxes If I Am Going Through A Divorce?
A: The date to keep in mind is December 31st. Prior to New Years Day, if you have not finalized all divorce proceedings, you are considered still married for tax purposes. However, there are a number of exceptions to this rule that will depend entirely on your ability to negotiate with your soon to be ex. There are certain perks to maintaining your marriage status through the tax year instead of filing "married filing separately." There is also the advantageous "head of the household" status. In every case, it is recommended that you speak with both your accountant and counsel on how to proceed.
Q: What Is The Gift Exclusion Tax?
A: In essence, the IRS allows up to $14,000 in gifts between individuals before they need to report it is as possible taxable income. This goes for all residents of the United States, not just divorced couples. However, during divorce proceedings and after, it is important to keep track of how certain items have been gifted to and by your ex. Because the amount seems to be relatively low in the grand scheme, it may appear to pose no issue financially. But, over the course of time and with enough "gifts" this particular loophole can add up - which can most certainly alter the division of property in your proceedings.
Q: Will Same-sex Couples be able to File Joint Returns this Year?
A: Yes. So long as the couple was married in a state that upholds same-sex unions (Pennsylvania), regardless of where they reside currently, they will be able to submit federal tax forms together in the 2015 tax season.
If you have additional questions regarding your financial status - before and after your divorce - don’t hesitate to contact Pennsylvania family law attorney Sheryl R. Rentz at (866) 290-9292.