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During the divorce process, how should income taxes be filed?

During the process of ending a marriage, is it best to separate finances or file taxes together as a married couple? According to the IRS, couples in the process of divorce but have not yet finalized are still eligible to file taxes together as a married couple. If filing separately, both must either take the standard deductions or both must itemize. In California and other states, couples can file joint tax returns if they are still married on the last day of the previous year.

One disadvantage of filing income taxes separately is that higher tax rates apply at lower levels of income. The amount of standard deductions declines, and itemized deductions are reduced or eliminated. More Social Security benefits are taxable when filing separately, and the likelihood of paying the Alternative Minimum Tax increases. Credits such as the Earned Income Tax Credit, educational Lifetime Learning Credits and Elderly and Disabled credits are off limits to those filing separate tax returns.

One reason to file separately is if one spouse is breaking tax laws or reporting fraudulent information. Any penalties and fines incurred by filing false returns is the responsibility of both parties who signed the joint return. Another reason would be to itemize deductions such as medical expenses. Couples who have paid a high amount of out-of-pocket medical expenses and have a wide income gap may consider filing separately to deduct expenses.

Most couples will find that during the divorce process, joint filing may be the more economical choice for everyone. In California, those with questions about their tax options during the divorce process may benefit from speaking with a financial advisor and an attorney. A well-informed lawyer can suggest the best tax options for one's financial situation.

Source: wbrc.com, "Should couples file taxes jointly or separately?", Feb. 21, 2018

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