With 2021 upon us, many people in Gulfport may be turning their attention to their taxes. If you divorced in 2020 there are some tax related issues you should be aware of. The following is a brief overview of how the divorce issues of alimony and child custody can affect your income taxes.
Taxes and alimony
It used to be the case that alimony payments had to be reported as income for the receiving party and were tax deductible for the paying party. However, in 2017 a law was passed that changed this. Now, for divorces finalized after December 31, 2018, alimony payments do not need to be reported as income for the receiving party and are no longer tax deductible for the paying party.
Taxes and child custody
Before 2018, parents were permitted to exempt their child as a dependent. This lowered their taxable income. These exemptions are no longer in place. However, if a parent has a child under age 17, they may still be able to claim the Child Tax Credit of $2,000 per child. If parents are divorced, only one parent may claim this credit. Your divorce decree should state which parent is to claim the Child Tax Credit. Child support payments cannot be deducted nor are they considered taxable income.
Seek assistance if you are thinking of divorce
If you are thinking of divorcing in 2021, keep in mind that it could impact your 2022 taxes. And, if you divorced in 2020, you will want to take care when filing your income taxes. This post does not contain legal advice. Family law attorneys in the Gulfport area may be of assistance to those thinking of divorce.