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A few things to know about your divorce and taxes

Divorce has reached record highs across the country, and many married couples in Arizona are realizing their relationship has become untenable. When going through a divorce, there are a few things you can do to alleviate some of the financial stress of the split come tax time. Of course, tax day was just a few weeks ago - but this info will certainly help those seeking a divorce as the rest of 2012 unfolds.

First, clearly define your alimony payments. In your divorce agreement, if you do not say that your alimony payments are indeed "alimony payments", they will just be treated as income. When these payments are deemed "alimony," the payer can deduct the payments on his or her taxes. This stipulation has to be made in your agreement, though.

Second, utilize your dependency exemption. Most of the time, the parent who has the most time with their children gets the exemption; but this can be altered. Your divorce settlement can clarify this, allowing the splitting couple to share the exemption (one parent gets it one year, the other the next).

As we discussed last week, Arizona is a communal property state -- in other words, each party in the marriage has equal ownership in any property acquired during the marriage. So it is best to discuss how communal property affects your tax filing with an experienced divorce attorney.

One final, but very important, thing to remember: if you have not completed your divorce before the end of the year, you will be considered "married" for your tax filing. That means you and your spouse could employ some financial finesse and remain "married" on a joint filing -- by waiting to complete the divorce until the new year.

Source: Reuters, "Tax Planning for the divorcing and newly divorced," Amy Feldman, May 4, 2012

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