Tax Breaks Divorcing Individuals Should Know About
When a couple is divorcing they usually fight to keep the custody of the children. Most parents do this because they love their children too much and they think that they can be able to take good care of them than the other partner. However, there are some unfortunate parents who unwillingly accept their children to be taken away because they think that they cannot afford to keep them. No matter how hurting it is to them they simply do not want to make the children struggle on her small salary. This type of parents should know that there are some exemptions that come with keeping custody of the children.
When a divorce is being settled, it says who will have the right to the dependency exemption. This exemption might be released in the coming years. There are some tax cases that belong to the custodial parent even in the case where that parent releases the exemption to the parent who has no custody of the children. A good example of such a tax break would be the child care credit.
Many might wonder what happens to the parent who has the obligation to provide child support but has no custody of the children since he is not entitled to any exemptions. You should know that there are certain tax benefits that are enjoyed by both parents. No matter who claims the dependant exemption both the parents can enjoy the following tax breaks since the child is depending on both of them.
They include:
1. Deduction on selected medical expenses
2. Reimbursements by employers tax free on medical expenses
3. Employee discounts that are free of tax and have no incremental cost on services
4. Having distributions that are tax free from accounts for medical savings in the case where the distribution is used to cater for the child's medical expenses that are qualified.
5. The health plan provided by the employer should be completely tax free
6. Distributions from accounts for health savings should be tax free when they are used to cater for the child's medical expenses that are qualified.
However this tax breaks come with several conditions for them to apply. The main one being that the parents have to be divorced, live apart or legally separated at all times. The time period that has been given is the last six months of that particular year.
Other conditions that have to be met would be
1. Child support provided by the parents should be well over half the total in that particular year.
2. The child should have been in the custody of either both parents or one of the parents for more than half of that particular year.
3. The child has to be a qualifying relative or qualifying child of one of the parents.
If it so happens that one of the parents is in a much higher tax bracket than the other, for them to be bale to take advantage of this tax breaks to the maximum they should let the parent paying be the one to take care of the medical costs.