Divorce is a long series of “Who gets what?” Who gets the wedding china? Who gets the timeshare? Who gets the antique clock collection? And of course: Who gets the tax deductions?
Besides who gets to claim the kids as dependents (we’ll talk about that issue in Part II), there are other tax breaks to consider as well. For instance, if one spouse has paid for the education of the other spouse, who gets to deduct the student loan interest? Or, if one spouse stays in the marital home, who gets to declare the mortgage interest in the year of the divorce?
Even in divorces where both parties are well represented by legal counsel, rights to tax deductions can be overlooked. The last thing anyone wants is a reason to reopen the divorce, so it’s best to deal with these issues up front, or as soon as you realize that they should have been dealt with up front.
Tax deductions can add up to a considerable amount. When you think about them as cash it’s easy to understand why they can be hot issues. After all, if you or your spouse can save $10,000 on their income tax bill, that’s a big deal!
Today, list all of the tax breaks your spouse was entitled to pre-divorce. Then take a look at the divorce decree and find out if the tax deductions on your list were covered in the settlement. If not, contact your attorney so that the issue can be handled properly.
Do not, I repeat do not, go stealth on this one. Otherwise your spouse may end up in some serious hot water that costs way more than a $10,000 tax deduction!
Check back in a couple of days when I’ll share my thoughts on dependent deductions. Fun!
