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Claiming head of household after divorce

After parents in Georgia get a divorce, one may be able to claim head of household and claim a tax credit for their child. However, determining how this is done can be confusing.

First, the divorce must be finalized by the end of the calendar year in order to claim this status for the year. Next, the child must spend the majority of the time with the parent who files as head of household. The parent must also pay most of the expenses. A custodial parent can transfer the right to claim the child as head of household to the noncustodial parent.

The Tax Cuts and Jobs Act removed the dependency exemptions. However, the head of household parent can now claim a child tax credit. If parents have one child and share custody, the parents can take turns having the child just over half the time each year in order to qualify as head as household and get the child tax credit. If there are two children, each parent can claim one child. If there are three, parents can take turns claiming a third child. Parents may want to work with a financial planner to be sure they understand how divorce will affect their taxes.

Another tax consideration for people getting a divorce is alimony. Under the Tax Cuts and Jobs Act, alimony is no longer tax deductible for the payer or tax payable for the recipient if the divorce is finalized after the end of 2018. This could affect both how much is paid in alimony and how assets are divided, particularly in high-asset divorce cases. Furthermore, the sale of division of some assets could have tax consequences. For example, if a 401(k) is divided, rolling the distribution into an IRA will prevent having to pay taxes on it. Selling some assets might incur a capital gains tax.

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