Bury the Hatchet, Divorcees…For the Tax Break

WSJ Wealth Adviser Briefing: Bury the Hatchet, Divorcees…For the Tax Break
By Michael Wursthorn
Mar 27, 2017 5:30 am ET
Divorced couples have a good reason to put aside their differences: for the tax break.
Issues can resurface annually during filing season and continue to affect couples years after they split. If former spouses don’t set aside their differences, one or both partners often end up overpaying.
Scott Kaplowitch, managing partner with Edelstein & Co. in Boston, recently prepared a divorced couple’s returns. Although the ex-wife had the right to take deductions and credits for the couple’s children, there was no benefit for her because she has no employment income. She allowed her former husband to use the tax breaks and saved him about $2,500, Mr. Kaplowitch says. The couple didn’t split the savings, he adds, but “it produced good will for the future.”
Tensions between ex-spouses are evident in Internal Revenue Service data. For the five years that ended in 2015, people paying alimony deducted some $57 billion, while people receiving alimony claimed only about $47 billion—a $10 billion discrepancy.