For many Pennsylvania residents going through a divorce, next year’s tax return is likely the furthest thing from their minds. However, it is important to understand the implications that various divorce decisions will have on one’s tax obligations. In regard to child custody and child support, there are numerous ways that a parent’s tax return might be impacted.
For example, the issue of which parent has the right to claim a child as a dependent should be discussed during divorce negotiations. Many parents assume that the custodial parent will automatically receive the right to claim children as dependents. However, this is not the case. Parents can negotiate this matter the same way that they might negotiate all other aspects of their divorce and custody agreement.
For example, there are cases in which one parent would receive a far greater benefit from claiming a child as a dependent than the other parent. In such a case, the couple can negotiate a settlement in which the noncustodial parent retains the right to claim one or more children as a dependent. The other parent might receive a greater share of assets or other advantages to offset that tax benefit.
In regard to child support, parents must understand that support from one party to the other is neither tax-deductible nor considered income. While alimony payments can be included in one’s tax return as deductions or income, child support is not handled in the same manner. Understanding this in advance of negotiations can help both parties have a better understanding of their financial future.
When it comes to child custody and child support, Pennsylvania parents should take the time to sit down with their attorney or financial advisor to learn how their tax obligation will be impacted by the upcoming shift in family structure. As with all financial matters, being fully informed is the best way to reach a positive outcome. The years following a divorce require a degree of readjustment when it comes to financial planning, and understanding what to expect can make it far easier to navigate that process.
Source: madison.com, “Getting Divorced? Here Are 4 Ways Your Taxes Will Change“, Wendy Connick, Sept. 24, 2017