Divorce and Taxes

A divorce impacts more than the structure of a family. It also can have a dramatic effect on the tax liability of both spouses based on choices made and decrees entered during the divorce proceedings.

Filing Tips

When you are ready to file your tax return, the Internal Revenue Service suggests that you take an extra few minutes to double check certain items to prevent mistakes that could cost you penalties and interest or delay your refund.

Dividends Received Deduction

A corporation that receives dividends from a taxable domestic corporation may be entitled to a special deduction from gross income. The recipient corporation may deduct, within certain limits, 70 percent of the dividend received if the corporation receiving the dividend owns less than 20 percent of the corporation distributing the dividend. The amount of the deduction is increased to 80 percent of dividends received if 20 percent of the distributing corporation is owned by the recipient corporation.

Liens

Once the Internal Revenue Service has assessed a tax and has sent the taxpayer a bill in the form of a Notice and Demand for Payment, a lien arises in favor of the government on all real, personal, tangible, or intangible property of the delinquent taxpayer until the amount is paid. By filing notice of the lien, the IRS has publicly notified all creditors of the taxpayer that it has a claim against the taxpayer's property, including property acquired after the lien was filed. The notice establishes priority of the government's lien in circumstances such as bankruptcy proceedings or sales of real estate. A federal tax lien may harm a taxpayer's credit rating and impair his or her ability to get a loan, a credit card, or a mortgage.

Clean Fuel Tax Deduction

A taxpayer who is the original owner of a qualifying hybrid vehicle that combines an electric motor with a gasoline-powered engine may be eligible to claim a one-time tax deduction on his or her federal income tax return. In an attempt to encourage consumers to purchase more fuel efficient automobiles, Congress has enacted a federal tax law that allows individuals to claim a deduction for the incremental cost of buying a motor vehicle that uses a clean-burning fuel. Hybrid vehicles obtain higher fuel efficiency and produce fewer harmful emissions than similar gasoline-powered vehicles.