When you're filing taxes after or during your divorce, you may have some questions in mind. Here are some tax tips from the IRS for couples who are going through a divorce:
Filing status. Your marital status on Dec. 31 determines your filing status. If you are considered legally divorced on Dec. 31, you can file as single or head of household. However, if you're in the process of divorce, you may want to file a joint return instead of filing as married filing separately. You'll both get lower taxes if you file jointly. It's one thing that's a win-win for both parties, and an opportunity to cooperate.
Alimony. If your divorce was finalized before 2019, you can deduct alimony payments you make to your ex-spouse. The receiver must pay tax on the income.
Children. If you are filing separately, both of you cannot claim your children as dependents in any given year. If you are the custodial parent (having custody of the children most of the time) it is generally your right to claim them as dependents. However, this is another area that couples may choose to cooperate on, especially if the non-custodial parent is diligently making child support payments.
Health insurance expenses. Even if you're not the custodial parent, you can deduct your child's medical expenses if you pay for them (they're on your employer-paid policy, for example).
Tax credits related to the children. You can only claim them if you are the custodial parent.
Other tax refunds. If you and your spouse are expecting a refund, make sure to include it on your financial statement so it can be divided equally.
Sale of your home. If you're selling your home when you split up, you must consider the capital gains tax implications. Currently the tax laws allow for no capital gains tax on the first $250,000 of profit on the sale of your home if you have lived there at least two years out of the last five. Married couples filing jointly can exclude $500,000. However, after the divorce is final, each spouse can exclude $250,000 from capital gains tax.
The first step in that is finding a financial advisor you can trust who will help you create a road map for your solo financial future. At Harbor West, we specialize in helping people going through divorces wrangle their financial issues, so that you can concentrate on getting through this emotional time without worrying about money.
This information is provided for general purposes and is subject to change without notice. Every effort has been made to compile this material from reliable sources; however, no warranty can be made as to its accuracy or completeness. Before acting on any of the information, please consult your Financial Advisor for individual financial advice based on your personal circumstances.
Monetary policy is normalizing due to economic improvement.
On March 15, the Federal Reserve raised the benchmark interest rate by a quarter-point to a range of 0.75-1.00%. The increase was widely expected, and it represented a vote of confidence in the economy. 1
This was the central bank's second rate hike in three months, and Wall Street took it in stride, with the S&P 500 rising nearly 15 points on the day. One reason for that may have been the Fed's latest dot-plot forecast, which remained as it was when the last interest rate adjustment was made in December. The Fed still projects a total of three hikes for 2017. 1,2
Oregon State University researchers recently concluded that working just a year past 65 can be good for longevity. Analyzing 28 years of data from the National Institute on Aging-funded Healthy Retirement Study, they found that healthy 66-year-old retirees were found to have had an 11% lower risk of death than those retiring at 65. 4
If you are 10 or 15 years older than your spouse or partner, to what degree should that age gap influence your retirement planning? You will want to consider this question, for it may affect many aspects of your financial future – such as your planned retirement dates, how you decide to claim Social Security, and how you choose to invest.
Your specific answer to that question depends on the advice of your doctor. Keeping that fundamental in mind, there are some vaccines that many health care professionals advocate for seniors.
A report from the non-partisan American Enterprise Institute says that in 1970, Americans in the middle 40% of U.S. income distribution had saved an average of 33% of their yearly income in retirement accounts. That compares to an average of 210% of annual earnings for Americans in the same income demographic today. 3
Last December, the 21st Century Cures Act became law, opening the door to the assignment of greater federal funds for medical research and more expedient approval of medical devices and drugs by the Food & Drug Administration.