Michigan couples who get a divorce will also see changes in their taxes. It is important that individuals are aware of this so that there will not be any unpleasant surprises at tax time.
Because the IRS will classify individuals whose divorce was completed by the end of the year as unmarried, those individuals will no longer have the option of using the 'married filing separately" or 'married filing jointly" statuses. They may use the 'head of household" status if they have qualifying dependents residing with them. If not, they will be required to submit a return using the 'single" filing status.
After parents get a divorce and are no longer residing with one another, the dependent exemption for their children can be claimed by only one of the parents, providing him or her with a tax break. Generally, the custodial parent, or the parent with whom the children reside the majority of the year, is entitled to the exemption. However, if the divorce settlement includes a provision allowing the noncustodial parent to claim the exemption, Form 8332 will have to be signed by both parties and submitted with that parent's tax return.
Alimony is another aspect that can affect an individual's taxes. People who are required to pay alimony are able to deduct the amount paid from their taxable income. Conversely, those who receive alimony are required to include the amount as part of their taxable income.
A family law attorney may protect the interests of clients who are going through a high asset divorce. The attorney may advise of which retirement plans, real estate or business assets a client should retain ownership. Litigation or negotiation may be used to obtain favorable property division terms for the settlement.