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Chandra E. Miller

A Northern California Family Law Firm

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Tax filing considerations for divorcing spouses

| Mar 17, 2016 | High Asset Divorce

It is sometimes difficult for divorcing couples to maintain perspective and focus on long-term considerations during heated discussions over property division and spousal support, and this may be particularly true during the contentious negotiations common in community property states like California. Spouses drawn into bitter disputes over assets with high sentimental value but low monetary worth sometimes fail to think about their retirement years, and agreements are frequently reached in haste just to get the process over with.

Tax deductions are one of the benefits of marriage that many divorcing spouses fail to take into consideration. One of the chief rallying cries of those who sought to legalize gay marriage was that it was wrong to deny same-sex couples these financial benefits, but spouses who have their taxes prepared by a professional and merely glance at the completed documents may not understand just how much of a difference it can make to file taxes jointly.

A person’s tax status is determined at the end of the calendar, and people whose divorces have not yet become final on that date are considered to be married for tax purposes. They have a choice between filing a joint return or claiming the status of “married filing separately”. Those who file their taxes individually have lower deductions, and higher tax rates kick in for them at lower income levels. Some itemized deductions enjoyed by married couples are not available to individual filers, and many of the deductions that are still available are reduced. The Alternative Minimum Tax exemption is cut in half for those filing individually, and many of the most popular tax credits are also off the table for them.

Experienced family law attorneys may help their clients to avoid the pitfall of myopic thinking by reminding them that agreements can be easier to reach when the atmosphere is amicable and urging them to take a constructive approach to negotiations. Community property laws and the adversarial nature of the legal system can sometimes make this difficult, and attorneys may suggest that spouses consider alternative approaches such as collaborative divorce or mediation.