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As you might imagine, the intersection of divorce and taxes can be very confusing -- if not downright unpleasant. But whether you've divorced or separated, be it this year or last, there will be tax consequences that you need to be aware of. To that end, here's a roundup of some of the issues you may face this filing season.

Claiming the kids.

Generally, whoever provides the bulk of the financial support can claim the children on the tax return. It doesn't matter how many months or days you provided the support, simply that your share of the support is more than 50%

There's a special test for divorced or legally separated parents, though. In this case, the "custodial parent" (simply, the one who had custody of the child for more than half the year) is treated as meeting the support test, even if the noncustodial parent actually paid most of the child's support. If the split is amicable and both partners are interested in maximizing the tax benefit, the custodial parent is able to sign a waiver on Form 8332, allowing the noncustodial parent to claim the exemption for the child. The waiver can apply to the current year only, or all future years.

Alimony and child support.

Alimony is taxable, child support is not. Typical of the tax code, what's taxable to the recipient is deductible to the payer -- so if you're making an alimony payment, the amount is deductible to you and taxable to your ex. (Alimony payments are an above-the-line deduction, which means you don't need to itemize in order to claim it.) Child support, though, is neither deductible nor taxable.

Legal fees.

You may know that some legal fees are deductible -- unfortunately, though, most fees arising from divorce cases are not. Legal expenses are deductible when they are a part of a lawsuit having to do with your business, your employment or an income-producing property. Legal fees for personal lawsuits are


deductible, unless you are awarded taxable damages. Since legal fees for tax advice are deductible, though, expenses for divorce-related tax planning may be deductible.

Home sales.

If selling a home is the byproduct of a divorce or separation, you might need to do some finagling to ensure you don't lose out on one of the best tax breaks available: the exemption of $500,000 in gain on the sale of a home, which drops to $250,000 if the seller is single. If you know you'll need to sell and the gain on your home (the amount it has appreciated since you bought it) is more than $250,000, consider trying to sell while you're still married.

When one spouse decides to stay in the home, he or she often "buys out" the spouse who leaves. Doing so doesn't prompt an immediate taxable event for either party (the amount is not taxable to the recipient), but it could have some longer-term repercussions to the spouse who stays. That's because the cost basis of the home won't change, even though the remaining spouse, in essence, increased his or her equity. That means a bigger gain when the remaining spouse eventually sells the home. If that's a fear, consider ways of increasing your basis -- make sure you've properly recorded all money spent on home improvements -- that gets added onto your basis dollar for dollar.

Amid whatever legal wrangling that may be involved in your split, you'll also need to make sure you see a tax attorney or CPA to ensure you're aware of the tax consequences of all your actions. You don't want to involve other people in this painful process -- least of all your Uncle Sam.