Tax Considerations in Minnesota Divorce Cases

Divorce cases can have many hidden tax issues.  Without proper representation, errors can cause issues moving forward.  

 

Taxes and Spousal Maintenance

In Minnesota, the tax implications of spousal maintenance can vary significantly based on when the maintenance order was issued. For orders dated on or before December 31, 2018, spousal maintenance payments are deductible for the payor and count as taxable income for the recipient. However, for orders made on or after January 1, 2019, the tax deduction for spousal maintenance payments has been eliminated. Instead, these payments are now made from the payor's after-tax income and are not considered taxable income for the recipient.

Taxes and Child Support

Child support follows a straightforward rule in Minnesota: it is not included as gross income for the recipient and cannot be deducted by the payor. Child support payments are made with after-tax income, and parties cannot alter this rule through a mutual agreement.

Strategic Considerations

For those receiving both spousal maintenance and child support, it could be advantageous to designate some of the support as child support to utilize the full collections services offered by public authorities. These services are limited for cases involving spousal maintenance only.

Income Tax Dependency Exemptions and Credits

The default rule is that the custodial parent claims the children as dependents for tax purposes, but this can be altered if the custodial parent signs an IRS Form 8332 waiver. Courts in Minnesota can also adjust these exemptions, considering the children's best interests when making such decisions.

Filing Status: Married vs. Single vs. Head-of-Household

The tax filing status for a given year is determined by your marital status on December 31st. If divorced by that date, you may file as single or head-of-household if you meet specific criteria related to maintaining a household for a dependent. If the decree is not final, you must generally file as married.