6 Considerations To Make About Your Taxes After a Divorce
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Divorce can be a difficult and emotionally charged process, and there are a lot of processes to go through and documents to sign. Unfortunately, even once the separation documents are signed, there’s still something else to occupy your mind: your taxes.Divorce does have its financial implications, and one of the biggest implications occurs during the filing of taxes. As such, if you’ve just been through a divorce, you need to be wary about the various things that may affect you when you are trying to file taxes!Today, we want to share with you a couple of considerations you must make when you file taxes after a divorce:
1. Who Will Claim the Children as Dependents?
In most cases, the parent who has custody of the children will claim them as dependents on their taxes. However, there may be cases where the parents agree to split the dependency claim or where one parent claims the children for some years, and the other parent claims them in other years. Be sure to discuss this with your ex-spouse and come to an agreement before filing your taxes.
2. Who Will Claim the Home as Their Primary Residence?
The home is usually the biggest asset that a couple has, and it can have a big impact on your taxes. The parent who claims the home as their primary residence can take advantage of the capital gains exemption, which can save a significant amount of money.
3. Who Will Claim the Expenses Associated With the Children?
There are a number of expenses associated with raising children, including childcare, education, and extracurricular activities. In most cases, the parent who claims the children as dependents will also claim these expenses. However, it’s important to discuss this with your ex-spouse to ensure that both of you are on the same page.
4. What Will Happen to Your RRSPs?
In Canada, couples can split their RRSPs when they divorce. This means that each spouse can take their share of the RRSP and put it into their own account. This can be a good way to minimize the tax implications of a divorce.
5. What Will Happen to Your Pension?
In most cases, a pension will be considered an asset to be divided during a divorce. This means that each spouse will be entitled to a portion of the pension. However, there are some exceptions to this rule, so it’s important to speak to a lawyer or financial advisor to get a clear understanding of your situation.
6. What Other Tax Implications Should You Be Aware Of?
There are a number of other tax implications to be aware of when going through a divorce. For example, you may no longer be eligible for the spousal tax credit, and you may have to pay capital gains tax on any assets that you own. Also, it may be that the CRA may not see you as separated yet because you haven’t met the 90-day separation requirement. Either way, it is vital to know these implications to ensure you’re filing properly.
As you can see, there is still a lot of work to be done even after the divorce is through. Tax is a necessary part of your life, and even if you don’t like it, you need to get on top of it. If you find yourself unable to quickly manage your taxes, we highly recommend reaching out to divorce financial planners to help you better understand your finances after the separation. This allows you to worry less about your finances and focus more on starting a new life!Alberta Divorce Finances is a divorce financial planner in Calgary, helping individuals overcome tough situations by getting them on top of their finances. If you are looking for divorce financial advice and more, reach out to us today!