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How taxes change after a divorce

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People in Michigan who are going through a divorce will need to file their taxes differently after the divorce is final. In the year that the divorce or separation is finalized, the person will be considered single or head of household, if there are dependents, for that tax year. Following an annulment, people must amend open tax returns they filed as married.

Certain tax credits that married couples took when filing together will only go to one person after the divorce. If the couple owned a home, the one who got it will still be able to use the mortgage interest deduction. The custodial parent usually gets the dependent exemption of $4,050 per child, but the two might make an agreement that this goes to the noncustodial parent. That parent must file Form 8332 along with taxes to claim the exemption. If giving the noncustodial parent the exemption is based on a condition such as paying child support that the parent does not fulfill, the custodial parent can revoke that parent's right to the exemption by fling Form 8332. The child tax credit also goes to just one parent.

The parent who pays alimony can deduct that alimony from taxes, but it must be mentioned in the divorce or separation agreement as alimony. The recipient has to pay taxes on it.

A high-asset divorce can have more property and more complex situations to work out. These divorce settlements may drag on for years if the couple cannot come to an agreement. Investments, properties in other states or countries, collections and ownership in businesses might be among the assets that need to be divided. A person may want to clarify goals for the divorce and work out a strategy with an attorney before negotiations begin. If negotiations fail, the case will go to litigation where the couple has far less input into the final decision.

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