Finally Divorced: Now What Are My Tax Deductions Concerning The Kids?
“Mommy and Daddy can’t get along anymore, so we’re going to get a divorce, but we still love you.” Anonymous
Famous last words! Now the Divorce is over and the divorced parents have to deal with each other on working out who may use the tax deductions on the child’s expenses. This is a very serious tax matter for both parents since if done incorrectly; both parties could be audited, with fines, penalties and much ill feeling. Working together on applying for deductions correctly is a good start on joint parenting of your child. You may have both made the decision not to be together, but you should continue after a divorce to make decisions on your child and his/her well-being.
Dependent Exception for Children
A qualifying child for purposes of the child tax credit:
1. Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them
2. Under age of 17 at the end of 2011,
3. Did you provide over half of his or her own support for 2011,
4. Did they live with you for more than half of 2011 and are you “the custodial parent”.
5. Did you claim them as dependent on your return?
6. Did you not file a joint return for the year and
7. Are you a U.S. citizen, a U.S. national, or a U.S. resident alien?
The custodial parent is entitled to take this exemption for their child since the child has lived over 50% of the time with this parent and also provides over 50% of the child’s support.
Then noncustodial parent may be able to take the deduction in specific cases (Non-Custodial Parent Rule):
1. A Custodial parent signs a written IRS declaration giving the noncustodial parent the right to claim the designated child as a dependent for the year.
2. If combined, both parents provide more than half of the child’s support
3. The parents are divorced or separated under a written agreement at the end of the year or have lived apart during the last six months of the year.
4. The child lives with the noncustodial parent more than half the year.
When a parent has equal joint physical custody of the child, it is problematic as to which parent is entitled to the exemption. To avoid the unnecessary expense of confronting this issue both parents should try to come to an agreement as to who will use the child exemption for the year and have the other parent sign an IRS declaration as to the exemption. Always keep a date and time log of when the child is in residence with you during the year and the expenses incurred on their behalf. This log may be very important in resolving many problems by establishing possession times of your child and can be strong evidence in a court of law.
When these requirements are met, the noncustodial parent is eligible for tax breaks with the designated child.
Dependency Exemption Deduction: $3,700 for 2011 and $3,800 for 2012.
Child Tax Credit: This credit is worth up to $1,000 for each eligible child.
Higher Education Tax Credits: American Opportunity can be worth up to $2,5000 during first four years of child’s college education. The Lifetime Learning credit can be worth up to $2,000 and covers usually any higher education tuition costs.
Student Loan Interest Deduction: A deduction up to $2,500 on qualified student loan interest paid by the parent.
Tuition Deduction: The deduction is up to $4,000 for higher education tuition and mandatory enrollment fees.
The noncustodial parent can usually claim the tax breaks below as long as the support and the custody requirements of the noncustodial parent rule are met. The custodial parent can also usually claim these breaks.
1. Itemized deductions for the child’s medical expenses paid by parent.
2. Tax free employer provided healthcare benefits for the child
3. Tax free heath savings account (HAS) distributions to cover the child’s medical expenses
Only A Custodial Parent Is Allowed Tax Breaks:
Head of Household (HOH) Filing: This filing is better than filing as a single taxpayer since the standard deduction is larger and tax brackets are looser.
Tax Free Childcare Assistance: Under an employer plan up to $5,000 in federal income tax free reimbursement for child care expenses.
Earned Income Tax Credit: In 2012, this credit is worth up to $3,169 for one child and up to $5,891 FOR THREE OR MORE CHILDREN. As a parent’s income goes up, the credit is phased out.
Child Care Tax Credit: This credit of between $600 to $1500 for one child, and $1,200 to $2,100 for two or more children, based on a parent’s income.
For more information see IRS- Child Tax Credit for 2011 filings: http://www.irs.gov/pub/irs-pdf/p972.pdf Also, IRS Publication504 (Divorced & Separated Individuals) http://www.irs.gov.
Women at Risk: The Hazards of a Bad Relationship
Abusive men, and women (physical or mental), are all about control and frequently evolve from abusive homes themselves. Police desire to help abused women, but often even after a complaint has been filed, women will not pursue the charges out of fear. Feeling helpless, they are often terrified, brain-washed and really believe that they have nowhere to go. It is not uncommon for an abuser to be very charismatic and after beating his victim return home the following day with flowers showing great affection to his victim. Unfortunately, the victim tends to believe the transparent words “I’ll never do it again!”
One of the most frustrating things for family and friends outside a battering relationship is trying to understand why the abused person doesn’t just leave. It is important to remember that extreme emotional abuse is always present in domestic violence situations. Violence takes place in many forms, is unpredictable and can happen all of the time or just once in a while. Violence is criminal including physical and sexual assault. It is paramount to remember that physical violence, even among family members, is wrong and against the law.
Some of the reasons partners stay in domestic violence situations are:
1. Economic dependence.
2. Fear of greater physical danger or danger for children.
3. Fear of being hunted down and suffering worse beatings.
4. Survival. Fear that the abuser will kill.
5. Fear of emotional damage to children.
6. Fear of losing custody of children.
7. Lack of alternative housing.
8. Lack of job skills.
9. Social isolation resulting in lack of support from family and friends.
10. Social isolation resulting in lack of information about her alternatives and support systems.
11. Lack of understanding from family and friends, police, ministers.
12. Negative response from community, police, courts, social workers.
13. Fear of involvement in the court process.
14. Fear of the unknown, chronic anxiety, and/or depression.
15. Acceptable violence. Living with constant abuse numbs the victim so that they are unable to recognize that they are involved in a set pattern.
16. Ties to the community. The children would have to leave their school, and family would have to leave friends and neighbors.
17. Ties to home and belongings.
18. Family pressure.
19. Denial.
20. Loyalty.
21. Love. Often an abuser is quite loveable and loyal when he is not being abusive.
22. Shame and humiliation. “I don’t want anyone else to know.”
23. Guilt. They believe the abuse is caused by some inadequacy of their own.
24. Demolished self-esteem.
25. Lack of emotional support.
The following is a bill of rights for women in abusive relationships:
1. I have the right to ask for what I want.
2. I have the right to say no to requests or demands I can’t meet.
3. I have the right to express all of my feelings, positive or negative.
4. I have the right to change my mind.
5. I have the right to make mistakes and not have to be perfect.
6. I have the right to follow my own values and standards.
7. I have the right to say no to anything when I feel I am not ready, it is unsafe or it violates my values.
8. I have the right to determine my own priorities.
9. I have the right not to be responsible for others’ behavior, actions, feelings or problems.
10. I have the right to expect honesty from others.
11. I have the right to be angry at someone I love.
12. I have the right to be uniquely myself.
13. I have the right to feel scared and say “I’m afraid.”
14. I have the right to say “I don’t know.”
15. I have the right not to give excuses or reasons for my behavior.
16. I have the right to make decisions based on my feelings.
17. I have the right to my own needs for personal space and time.
18. I have the right to be playful and frivolous.
19. I have the right to be healthier than those around me.
20. I have the right to make friends.
21. I have the right to change and grow.
22. I have the right to be treated with dignity and respect.
23. I have the right to be happy.
Anyone can be a victim of domestic violence. Although both men and women can be abused, most victims are women. Children in homes where there is domestic violence are more likely to be abused or neglected. Even if the children are not physically harmed, they are likely to have serious emotional and behavioral problems and scars.
Abusers try to control their victim’s lives. When abusers feel a loss of control – like when the abused person leaves them – the abuse may get worse. If you are in an abusive situation, take special precautions when you leave. Develop a safety plan.
Foreclosures in Texas : Can I Save My Home?
Amidst the Government’s halt on foreclosures, Bank of America has stopped seizing foreclosed homes in all 50 states, but is continuing to sell homes that have already been foreclosed on and is still processing new foreclosures.
Outside the major banks and even in states that do require a judge to look over the bank’s shoulder, foreclosures are going forward at a head-spinning pace. The nation’s regrettable mortgage crisis continues. One million residences have fallen into foreclosure since 2006 and an additional 5.9 million are expected over the next four years. Lenders and investors will have to acknowledge huge losses and try to figure out how to keep borrowers making at least some monthly payments.
However, when the housing disaster ends, the lenders’ contention that they have done as much as possible to limit foreclosures and follow appropriate laws in doing so is hollow at best. The industry simply has not stepped up to address the volume of the problem. And as the crisis moves forward, more people are falling through the cracks.
For lenders and loan servicers, civil lawsuits claiming deceptive sales practices or violations of consumer protection laws are becoming more prevalent as foreclosures grow in numbers. The Mortgage Electronic Registration System, which was created to handle mortgage transfers between member banks, is facing its own legal problems. A lawsuit filed on Sept. 28 in federal court on behalf of Kentucky homeowners claims that MERS was part of a conspiracy to create false promissory notes, affidavits, and mortgage assignments to be used in mortgage foreclosures. Similar class action suits have been filed in Florida and New York.
Title insurers will also be in court bringing and defending lawsuits. The insurers will be going after banks or whoever has assured them there was a clear title. The costs for title insurers to defend customers and reimburse for lost properties rose 14 percent, to $480.5 million in 2010’s first half.
Persons buying homes in foreclosure are facing their own worries as paperwork errors raise question about the validity of the titles needed to prove ownership. Defective documentation has created millions of blotched titles that will plague the nation for the next decade.
Meanwhile, as public outrage continues to mount, many homeowners are reclaiming their homes through the Courts.
In general, Judges are unlikely to look favorably on a bank that claims paperwork flaws do not matter because the borrower was in default on the loan. There must be some integrity in the foreclosure process and the conduct of lenders pursuing their right under loan documents.
Big Changes in Texas Spousal Maintenance Laws
Texas House Bill 901 changing the spousal maintenance law in the Texas Family Code became effective for divorce cases filed on or after September 1, 2011. The bill revises the conditions that establish eligibility for spousal maintenance, commonly referred to as alimony, and changes the factors required to be considered by a court in determining the nature, amount, duration, and manner of periodic payments for a spouse who is eligible to receive maintenance.
Eligibility for spousal maintenance requires that the spouse seeking maintenance lack sufficient property to provide for the spouse’s minimum reasonable needs.
The new law provides potentially increased relief to spouses who have been out of the work force, are disabled, are victims of family violence or are the primary custodians of a disabled child.
Major changes to the Texas spousal support law are:
1. The maximum amount of spousal support that courts may award increased from $2,500 to $5,000.00 per month, although still limited to 20 percent of the payer’s average gross monthly income.
2. The duration of spousal support extended from a maximum of 3 years to a maximum of 5, 7 or 10 years, generally depending on the length of the marriage.
3. The law clarified that if a person has primary care for a disabled child, the custodial parent may be prevented because of the child’s disability from earning sufficient income to meet the custodial parent’s minimum reasonable needs.
4. The law also clarified that a person may not be held in contempt for failing to pay spousal support which is in an agreed order and extends beyond the period of time provided under the law.
In order to receive “maintenance,” (which is the statutory term for spousal support), the spouse seeking support must lack sufficient property to provide for the spouse’s “minimum reasonable needs”, AND one of the following:
(1) The recipient must be unable to earn sufficient income to provide for his or her minimum reasonable needs because of an incapacitating mental or physical disability;
(2) The marriage lasted for 10 years or longer and the recipient lacks the ability to earn sufficient income to provide for his or her minimum reasonable needs;
(3) The recipient is the custodian of a child of the marriage of any age who requires substantial care and personal supervision because of a physical or mental disability that prevents the spouse from earning sufficient income to provide for the spouse’s minimum reasonable needs; OR
(4) The person ordered to pay support was convicted of or received deferred jurisdiction for an act of family violence during the pendency of the suit or within two years of the date the suit is filed.
Under the previous law, under most circumstances, the court could only order maintenance for a maximum of three years, regardless of the length of the marriage. Under the new law, the court can order maintenance to continue for:
(1) 5 years if the parties were married less than 10 years and the maintenance is awarded due to family violence;
(2) 5 years if the parties were married more than 10 years, but less than 20 years.
(3) 7 years if the parties were married more than 20 years, but less than 30 years;
(4) 10 years if the parties were married for more than 30 years.
In cases where the maintenance is awarded due to the mental or physical disability of the spouse or a child of the marriage, the court may order that the maintenance continue as long as the disability continues.
However, in all circumstances, the law provides that the Court shall order maintenance for the shortest reasonable period that allows the recipient to earn sufficient income to meet his or her reasonable needs.
If you are contemplating dissolving your marriage and have questions concerning your financial future, seek competent legal counsel to help you determine whether you could be eligible for spousal support under the expanded provisions of the new law.
The Uniform Interstate Family Support Act (UIFSA) : How it can Affect Your Family Interstate Jurisdiction Problems
Are you a parent having trouble collecting your child support for the children because your EX-spouse lives in another state? This has been a problem for many families for a long time. The United States Congress recognized this problem and mandated all states to adopt the Uniform Interstate Family Support Act (UIFSA) to facilitate collection of child support across state lines.
It is no surprise that people move, but when trying to collect child support from an out-of-state parent you may need legal help to avoid unpleasant surprises.
When more than one state is involved in establishing, enforcing or modifying a child or spousal support order, the UIFSA determines the jurisdiction and power of the courts in the different states. The Act also establishes which state’s law will be applied, an important factor as support laws vary greatly among the states.
If there is no current child support order and the child and one parent live in Texas, the order or paternity determination may be established without another state’s involvement. If the parents have sufficient contact with Texas, the court may be able to enter an order even if one parent does not currently live in the state. UIFSA enables Texas and another state to cooperate to establish a child support order if another state’s assistance is needed because of residency issues.
UIFSA permits only one active support order for a case at a time. When there are multiple orders, UIFSA determines which support order will be followed, known as the “controlling order.” Orders may be registered in a different state for enforcement and modification purposes. The initiating state sends the order and documents to the responding state. The responding state registers the order and sends a notice to the other parent. The other parent has 20 days to file written objections regarding the order. If objections are made prior to the deadline, the court will hold a hearing and decide whether the order should be registered.
UIFSA also allows parents to enforce their support orders without the assistance of the state where the obligor (paying parent) lives. A withholding order, in many cases, can be sent directly to the out-of-state obligor’s employer requiring child support be deducted from the parent’s wages. The responding state also has the authority to pursue collection through enforcement hearings, license suspension, or incarceration of the delinquent, non-custodial parent.
If financial or other circumstances have changed, you may also request the court to modify a child support order. UIFSA sets the rules for modification. If either of the parents or the child still lives in the state that issued the controlling order, changes in the support amount must occur there. Otherwise the order may be registered and modified in the child’s home state. The child’s home state is generally where the child has resided for six (6) months with a parent.
If all parties have left the state that issued the controlling order, that state cannot change the support amount. To modify support, the order must be registered for modification in the state of residence of the parent not seeking modification.
UIFSA allows both parents to agree in writing that the state where one parent resides may modify the order and take control of the case. When a state modifies another state’s order, the new support amount is the amount to be collected by all any state in which the obligor resides.
Parents often turn to the Texas Attorney General for assistance in the collection and enforcement of child support, and that can be a good choice. However, parents – especially those who are experiencing continued delays and roadblocks – can hire a private attorney to advocate on their behalf and for the benefit of their children. An attorney can also provide guidance in enforcing and modifying terms of visitation.
NACOL LAW FIRM P.C.
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Attorney Mark A. Nacol is board certified in Civil Trial Law by the Texas Board of Legal Specialization
