Table of Contents
Your filing status is used in determining whether you must file a return, your standard deduction, and the correct tax. It may also be used in determining whether you can claim certain other deductions and credits. The filing status you can choose depends partly on your marital status on the last day of your tax year.
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You have obtained a final decree of divorce or separate maintenance by the last day of your tax year. You must follow your state law to determine if you are divorced or legally separated.
Exception. If you and your spouse obtain a divorce in one year for the sole purpose of filing tax returns as unmarried individuals, and at the time of divorce you intend to remarry each other and do so in the next tax year, you and your spouse must file as married individuals.
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You have obtained a decree of annulment, which holds that no valid marriage ever existed. You must file amended returns (Form 1040X, Amended U.S. Individual Income Tax Return) for all tax years affected by the annulment that are not closed by the statute of limitations. The statute of limitations generally does not end until 3 years after the due date of your original return. On the amended return you will change your filing status to single, or if you meet certain requirements, head of household.
If you are married, you and your spouse can choose to file a joint return. If you file jointly, you both must include all your income, exemptions, deductions, and credits on that return. You can file a joint return even if one of you had no income or deductions.
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Innocent spouse relief, which applies to all joint filers.
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Separation of liability, which applies to joint filers who are divorced, widowed, legally separated, or who have not lived together for the 12 months ending on the date on which election of this relief is filed.
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Equitable relief, which applies to all joint filers who do not qualify for innocent spouse relief or separation of liability.
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Have made and reported tax payments (such as federal income tax withheld from wages or estimated tax payments), or claimed a refundable tax credit, such as the earned income credit or additional child tax credit on the joint return, and
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Not be legally obligated to pay the past-due amount.
Note.
If the injured spouse's permanent home is in a community property state, then the injured spouse must only meet (2) above. For more information, see Publication 555, Community Property.
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If you are an injured spouse, you must file Form 8379 to have your portion of the overpayment refunded to you. Follow the instructions for the form. If you have not filed your joint return and you know that your joint refund will be offset, file Form 8379 with your return. You should receive your refund within 14 weeks from the date the paper return is filed or within 11 weeks from the date the return is filed electronically. If you filed your joint return and your joint refund was offset, file Form 8379 by itself. When filed after offset, it can take up to 8 weeks to receive your refund. Do not attach the previously filed tax return, but do include copies of all Forms W-2 and W-2G for both spouses and any Forms 1099 that show income tax withheld.
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If you and your spouse file separate returns, you should each report only your own income, exemptions, deductions, and credits on your individual return. You can file a separate return even if only one of you had income. For information on exemptions you can claim on your separate return, see Exemptions, later.
Table 1. Itemized Deductions on Separate Returns
This table shows itemized deductions you can claim on your married filing separate return whether you paid the expenses separately with your own funds or jointly with your spouse. Caution: If you live in a community property state, these rules do not apply. See Community Property.
IF you paid ... | AND you ... | THEN you can deduct on your separate federal return ... | ||
medical expenses | paid with funds deposited in a joint checking account in which you and your spouse have an equal interest | half of the total medical expenses, subject to certain limits, unless you can show that you alone paid the expenses. | ||
state income tax | file a separate state income tax return | the state income tax you alone paid during the year. | ||
file a joint state income tax return and you and your spouse are jointly and individually liable for the full amount of the state income tax | the state income tax you alone paid during the year. | |||
file a joint state income tax return and you are liable for only your own share of state income tax |
the smaller of:
|
|||
property tax | paid the tax on property held as tenants by the entirety | the property tax you alone paid. | ||
mortgage interest |
paid the interest on a qualified home held
as tenants by the entirety |
the mortgage interest you alone paid. | ||
casualty loss |
have a casualty loss on a home you own
as tenants by the entirety |
half of the loss, subject to the deduction limits. Neither spouse may report the total casualty loss. |
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Your tax rates will increase at income levels that are lower than those for a joint return filer.
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Your exemption amount for figuring the alternative minimum tax will be half of that allowed a joint return filer.
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You cannot take the credit for child and dependent care expenses in most cases.
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You cannot take the earned income credit.
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You cannot take the exclusion or credit for adoption expenses in most instances.
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You cannot take the credit for higher education expenses (Hope and lifetime learning credits), the deduction for student loan interest, or the deduction for tuition and qualified related expenses.
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You cannot exclude the interest from qualified savings bonds that you used for higher education expenses.
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If you lived with your spouse at any time during the tax year:
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You cannot claim the credit for the elderly or the disabled,
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You will have to include in income more (up to 85%) of any social security or equivalent railroad retirement benefits you received, and
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You cannot roll over amounts from a traditional IRA into a Roth IRA.
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Your income limits that reduce the child tax credit, retirement savings contributions credit, itemized deductions, and the deduction for personal exemptions will be half of the limits allowed a joint return filer.
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Your capital loss deduction limit is $1,500 (instead of $3,000 on a joint return).
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Your basic standard deduction, if allowable, is half of that allowed a joint return filer. See Itemized deductions, earlier.
Filing as head of household has the following advantages.
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You can claim the standard deduction even if your spouse files a separate return and itemizes deductions.
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Your standard deduction is higher than is allowed if you claim a filing status of single or married filing separately.
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Your tax rate usually will be lower than it is if you claim a filing status of single or married filing separately.
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You may be able to claim certain credits (such as the dependent care credit and the earned income credit) you cannot claim if your filing status is married filing separately.
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Income limits that reduce your child tax credit, retirement savings contributions credit, itemized deductions, and the amount you can claim for exemptions will be higher than the income limits if you claim a filing status of married filing separately.
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You are unmarried or “considered unmarried” on the last day of the year.
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You paid more than half the cost of keeping up a home for the year.
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A “qualifying person” lived with you in the home for more than half the year (except for temporary absences, such as school). However, if the “qualifying person” is your dependent parent, he or she does not have to live with you. See Special rule for parent, later, under Qualifying person.
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You file a separate return. A separate return includes a return claiming married filing separately, single, or head of household filing status.
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You paid more than half the cost of keeping up your home for the tax year.
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Your spouse did not live in your home during the last 6 months of the tax year. Your spouse is considered to live in your home even if he or she is temporarily absent due to special circumstances. See Temporary absences, later.
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Your home was the main home of your child, stepchild, or foster child for more than half the year. (See Qualifying person, on this page, for rules applying to a child's birth, death, or temporary absence during the year.)
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You must be able to claim an exemption for the child. However, you meet this test if you cannot claim the exemption only because the noncustodial parent can claim the child using the rule described later in Special rule for divorced or separated parents under Exemptions for Dependents. The general rules for claiming an exemption for a dependent are shown later in Table 3.
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Table 2. Who Is a Qualifying Person Qualifying You To File as Head of Household? 1
Caution. See the text of this publication for the other requirements you must meet to claim head of household filing status.
IF the person is your ... | AND ... | THEN that person is ... |
qualifying child (such as a son, daughter, or grandchild who lived with you more than half the year and meets certain other tests) 2 | he or she is single | a qualifying person, whether or not you can claim an exemption for the person. |
he or she is married and you can claim an exemption for him or her | a qualifying person. | |
he or she is married and you cannot claim an exemption for him or her | not a qualifying person. 3 | |
qualifying relative 4 who is your father or mother | you can claim an exemption for him or her 5 | a qualifying person. 6 |
you cannot claim an exemption for him or her | not a qualifying person. | |
qualifying relative 4 other than your father or mother (such as a grandparent, brother, or sister who meets certain tests) | he or she lived with you more than half the year, and he or she is related to you in one of the ways listed under Relatives who do not have to live with you in Publication 501 and you can claim an exemption for him or her 5 | a qualifying person. |
he or she did not live with you more than half the year | not a qualifying person. | |
he or she is not related to you in one of the ways listed under Relatives who do not have to live with you in Publication 501 and is your qualifying relative only because he or she lived with you all year as a member of your household | not a qualifying person. | |
you cannot claim an exemption for him or her | not a qualifying person. |
1 A person cannot qualify more than one taxpayer to use the head of household filing status for the year. |
2 See Table 3, later, for the tests that must be met to be a qualifying child. Note. If you are a noncustodial parent, the term “qualifying child” for head of household filing status does not include a child who is your qualifying child for exemption purposes only because of the rules described under Children of Divorced or Separated Parents under Exemptions for Dependents, later. If you are the custodial parent and those rules apply, the child is generally your qualifying child for head of household filing status even though the child is not a qualifying child for whom you can claim an exemption. |
3 This person is a qualifying person if the only reason you cannot claim the exemption is that you can be claimed as a dependent on someone else's return. |
4See Table 3, later, for the tests that must be met to be a qualifying relative. |
5 If you can claim an exemption for a person only because of a multiple support agreement, that person is not a qualifying person. See Multiple Support Agreement in Publication 501. |
6 See Special rule for parent for an additional requirement. |
Example.
You are unmarried. Your mother, for whom you can claim an exemption, lived in an apartment by herself. She died on September 2. The cost of the upkeep of her apartment for the year until her death was $6,000. You paid $4,000 and your brother paid $2,000. Your brother made no other payments towards your mother's support. Your mother had no income. Because you paid more than half of the cost of keeping up your mother's apartment from January 1 until her death, and you can claim an exemption for her, you can file as a head of household.
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The child must be presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family or the child's family.
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In the year of the kidnapping, the child lived with you for more than half the part of the year before the kidnapping.
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You would have qualified for head of household filing status if the child had not been kidnapped.
Generally, you can deduct $3,400 for each exemption you claim in 2007. However, if your adjusted gross income is more than $117,300 see Phaseout of Exemptions, later.
There are two types of exemptions: personal exemptions and exemptions for dependents. If you are entitled to claim an exemption for a dependent (such as your child), that dependent cannot claim his or her personal exemption on his or her own tax return.
You can claim your own exemption unless someone else can claim it. If you are married, you may be able to take an exemption for your spouse. These are called personal exemptions.
Your spouse is never considered your dependent. You may be able to take an exemption for your spouse only because you are married.
You are allowed one exemption for each person you can claim as a dependent. You can claim an exemption for a dependent even if your dependent files a return.
The term “dependent” means:
Table 3 shows the tests that must be met to be either a qualifying child or qualifying relative, plus the additional requirements for claiming an exemption for a dependent. For detailed information, see Publication 501.
Table 3. Overview of the Rules for Claiming an Exemption for a Dependent
Caution. This table is only an overview of the rules. For details, see Publication 501.
• | You cannot claim any dependents if you, or your spouse if filing jointly, could be claimed as a dependent by another taxpayer. | ||
• | You cannot claim a married person who files a joint return as a dependent unless that joint return is only a claim for refund and there would be no tax liability for either spouse on separate returns. | ||
• | You cannot claim a person as a dependent unless that person is a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico, for some part of the year. 1 | ||
• | You cannot claim a person as a dependent unless that person is your qualifying child or qualifying relative. | ||
Tests To Be a Qualifying Child | Tests To Be a Qualifying Relative | ||
1.
2. 3. 4. 5. |
The child must be your son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister,
or a
descendant of any of them.
The child must be (a) under age 19 at the end of the year, (b) under age 24 at the end of the year and a full-time student, or (c) any age if permanently and totally disabled. The child must have lived with you for more than half of the year. 2 The child must not have provided more than half of his or her own support for the year. If the child meets the rules to be a qualifying child of more than one person, you must be the person entitled to claim the child as a qualifying child. (See Special test for qualifying child of more than one person.) |
1.
2. 3. 4. |
The person cannot be your qualifying child or the qualifying child of anyone else.
The person either (a) must be related to you in one of the ways listed under Relatives who do not have to live with you, in Publication 501, or (b) must live with you all year as a member of your household (and your relationship must not violate local law). 2 The person's gross income for the year must be less than $3,400. 3 You must provide more than half of the person's total support for the year. 4 |
1 Exception exists for certain adopted children. |
2 Exceptions exist for temporary absences, children who were born or died during the year, children of divorced or separated parents, and kidnapped children. |
3 Exception exists for persons who are disabled and have income from a sheltered workshop. |
4 Exceptions exist for multiple support agreements, children of divorced or separated parents, and kidnapped children. See Publication 501. |
A dependent is either a qualifying child or a qualifying relative. In most cases, because of the residency test (see item (3) under Tests To Be a Qualifying Child in Table 3), a child of divorced or separated parents will qualify as a dependent of the custodial parent under the rules for a qualifying child. However, the noncustodial parent may be able to claim the exemption for the child if the special rule (discussed next) applies.
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The parents:
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Are divorced or legally separated under a decree of divorce or separate maintenance,
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Are separated under a written separation agreement, or
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Lived apart at all times during the last 6 months of the year.
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The child received over half of his or her support for the year from the parents.
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The child is in the custody of one or both parents for more than half of the year.
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Either of the following applies.
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The custodial parent signs a written declaration, discussed later, that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches this written declaration to his or her return. (If the decree or agreement went into effect after 1984, see Divorce decree or separation agreement made after 1984, later.)
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A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2007 states that the noncustodial parent can claim the child as a dependent, the decree or agreement was not changed after 1984 to say the noncustodial parent cannot claim the child as a dependent, and the noncustodial parent provides at least $600 for the child's support during 2007. See Child support under pre-1985 agreement, later.
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The noncustodial parent can claim the child as a dependent without regard to any condition, such as payment of support.
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The custodial parent will not claim the child as a dependent for the year.
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The years for which the noncustodial parent, rather than the custodial parent, can claim the child as a dependent.
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The cover page (write the other parent's social security number on this page).
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The pages that include all of the information identified in items (1) through (3) above.
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The signature page with the other parent's signature and the date of the agreement.
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The exemption for the child.
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The child tax credits.
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Head of household filing status.
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The credit for child and dependent care expenses.
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The exclusion from income for dependent care benefits.
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The earned income credit.
Table 4. When More Than One Person Files a Return Claiming the Same Qualifying Child (Tie-Breaker Rule)
IF more than one person files a return claiming the same qualifying child and ... | THEN the child will be treated as the qualifying child of the ... |
only one of the persons is the child's parent, | parent. |
two of the persons are the child's parents and they do not file a joint return together, | parent with whom the child lived for the longer period of time during the year. |
two of the persons are the child's parents, they do not file a joint return together, and the child lived with each parent the same amount of time during the year, | parent with the higher adjusted gross income (AGI). |
none of the persons are the child's parent, | person with the highest AGI. |
Example 1—separated parents.
You, your husband, and your 10-year-old son lived together until August 1, 2007, when your husband moved out of the household. In August and September, your son lived with you. For the rest of the year, your son lived with your husband. Your son is a qualifying child of both you and your husband because your son lived with each of you for more than half the year and because he met the relationship, age, and support tests for both of you. At the end of the year, you and your husband still were not divorced, legally separated, or separated under a written separation agreement and you and he did not live apart for the last 6 months of the year, so the special rule for divorced or separated parents does not apply.
You and your husband will file separate returns. Your husband agrees to let you treat your son as a qualifying child. This means, if your husband does not claim your son as a qualifying child, you can claim your son as a dependent and treat him as a qualifying child for the child tax credit and exclusion for dependent care benefits, if you qualify for each of those tax benefits. However, you cannot claim head of household filing status because you and your husband did not live apart the last 6 months of the year. As a result, your filing status is married filing separately, so you cannot claim the earned income credit or the credit for child and dependent care expenses.
Example 2—separated parents claim same child.
The facts are the same as in Example 1 except that you and your husband both claim your son as a qualifying child. In this case, only your husband will be allowed to treat your son as a qualifying child. This is because, during 2007, the boy lived with him longer than with you. If you claimed an exemption, the child tax credit, head of household filing status, credit for child and dependent care expenses, exclusion for dependent care benefits, or the earned income credit for your son, the IRS will disallow your claim to all these tax benefits. In addition, because you and your husband did not live apart for the last 6 months of the year, your husband cannot claim head of household filing status. As a result, his filing status is married filing separately, so he cannot claim the earned income credit or the credit for child and dependent care expenses.
The amount you can claim as a deduction for exemptions is reduced once your adjusted gross income (AGI) goes above a certain level for your filing status. These levels are as follows:
AGI Level | |||
That Reduces | |||
Filing Status | Exemption Amount | ||
Married filing separately | $117,300 | ||
Single | 156,400 | ||
Head of household | 195,500 | ||
Married filing jointly | 234,600 | ||
Qualifying widow(er) | 234,600 |
You must reduce the dollar amount of your exemptions by 2% for each $2,500, or part of $2,500 ($1,250 if you are married filing separately), that your AGI exceeds the amount shown above for your filing status. However, you can lose no more than 2/3 of the dollar amount of your exemptions. In other words, each exemption cannot be reduced to less than $1,133.
If your AGI exceeds the level for your filing status, use the Deduction for Exemptions Worksheet, found in the instructions for Form 1040, 1040A, or Form 1040NR to figure the amount of your deduction for exemptions.
Alimony is a payment to or for a spouse or former spouse under a divorce or separation instrument. It does not include voluntary payments that are not made under a divorce or separation instrument.
Alimony is deductible by the payer and must be included in the spouse's or former spouse's income. Although this discussion is generally written for the payer of the alimony, the recipient can use the information to determine whether an amount received is alimony.
To be alimony, a payment must meet certain requirements. Different requirements generally apply to payments under instruments executed after 1984 and to payments under instruments executed before 1985. The requirements that apply to payments under post-1984 instruments are discussed later.
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A decree of divorce or separate maintenance or a written instrument incident to that decree,
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A written separation agreement, or
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A decree or any type of court order requiring a spouse to make payments for the support or maintenance of the other spouse. This includes a temporary decree, an interlocutory (not final) decree, and a decree of alimony pendente lite (while awaiting action on the final decree or agreement).
Example 1.
A court order retroactively corrected a mathematical error under your divorce decree to express the original intent to spread the payments over more than 10 years. This change also is effective retroactively for federal tax purposes.
Example 2.
Your original divorce decree did not fix any part of the payment as child support. To reflect the true intention of the court, a court order retroactively corrected the error by designating a part of the payment as child support. The amended order is effective retroactively for federal tax purposes.
Enter the amount of alimony you paid on Form 1040, line 31a. In the space provided on line 31b, enter your spouse's social security number.
If you paid alimony to more than one person, enter the social security number of one of the recipients. Show the social security number and amount paid to each other recipient on an attached statement. Enter your total payments on line 31a.
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The following rules apply to alimony regardless of when the divorce or separation instrument was executed.
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Child support,
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Noncash property settlements,
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Payments that are your spouse's part of community income, as explained later under Community Property,
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Payments to keep up the payer's property, or
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Use of the payer's property.
Example.
Under your written separation agreement, your spouse lives rent-free in a home you own and you must pay the mortgage, real estate taxes, insurance, repairs, and utilities for the home. Because you own the home and the debts are yours, your payments for the mortgage, real estate taxes, insurance, and repairs are not alimony. Neither is the value of your spouse's use of the home.
If they otherwise qualify, you can deduct the payments for utilities as alimony. Your spouse must report them as income. If you itemize deductions, you can deduct the real estate taxes and, if the home is a qualified home, you can also include the interest on the mortgage in figuring your deductible interest. However, see Example 2 under Payments to a third party, later, if your spouse owned the home, and Table 5, later, if you owned the home jointly with your spouse.
Example.
Your divorce decree calls for you to pay your former spouse $200 a month ($2,400 ($200 x 12) a year) as child support and $150 a month ($1,800 ($150 x 12) a year) as alimony. If you pay the full amount of $4,200 ($2,400 + $1,800) during the year, you can deduct $1,800 as alimony and your former spouse must report $1,800 as alimony received. If you pay only $3,600 during the year, $2,400 is child support. You can deduct only $1,200 ($3,600 - $2,400) as alimony and your former spouse must report $1,200 as alimony received.
Example 1.
Under your divorce decree, you must pay your former spouse's medical and dental expenses. If the payments otherwise qualify, you can deduct them as alimony on your return. Your former spouse must report them as alimony received and can include them in figuring deductible medical expenses.
Example 2.
Under your separation agreement, you must pay the real estate taxes, mortgage payments, and insurance premiums on a home owned by your spouse. If they otherwise qualify, you can deduct the payments as alimony on your return, and your spouse must report them as alimony received. If itemizing deductions, your spouse can deduct the real estate taxes and, if the home is a qualified home, also include the interest on the mortgage in figuring deductible interest. However, see the first example under Payments not alimony, earlier, if you owned the home, and Table 5, later, if you owned the home jointly with your spouse.
Table 5. Expenses for a Jointly-Owned Home
Use the table below to find how much of your payment is alimony and how much you can claim as an itemized deduction.
IF you must pay
all of the ... |
AND your home is ... | THEN you can deduct and your spouse (or former spouse) must include as alimony ... | AND you can claim as an itemized deduction ... |
mortgage payments (principal and interest) | jointly owned | half of the total payments |
half of the interest as interest expense (if the home is a
qualified home). 1 |
real estate taxes and home insurance | held as tenants in common | half of the total payments | half of the real estate taxes 2 and none of the home insurance. |
held as tenants by
the entirety or in joint tenancy |
none of the payments | all of the real estate taxes and none of the home insurance. |
1 Your spouse (or former spouse) can deduct the other half of the interest if the home is a qualified home.
2 Your spouse (or former spouse) can deduct the other half of the real estate taxes. |
The following rules for alimony apply to payments under divorce or separation instruments executed after 1984.
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A divorce or separation instrument executed before 1985 and then modified after 1984 to specify that the after-1984 rules will apply.
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A temporary divorce or separation instrument executed before 1985 and incorporated into, or adopted by, a final decree executed after 1984 that:
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Changes the amount or period of payment, or
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Adds or deletes any contingency or condition.
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Example 1.
In November 1984, you and your former spouse executed a written separation agreement. In February 1985, a decree of divorce was substituted for the written separation agreement. The decree of divorce did not change the terms for the alimony you pay your former spouse. The decree of divorce is treated as executed before 1985. Alimony payments under this decree are not subject to the rules for payments under instruments executed after 1984.
A payment to or for a spouse under a divorce or separation instrument is alimony if the spouses do not file a joint return with each other and all the following requirements are met.
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The payment is in cash.
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The instrument does not designate the payment as not alimony.
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The spouses are not members of the same household at the time the payments are made. This requirement applies only if the spouses are legally separated under a decree of divorce or separate maintenance.
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There is no liability to make any payment (in cash or property) after the death of the recipient spouse.
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The payment is not treated as child support.
Each of these requirements is discussed below.
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Transfers of services or property (including a debt instrument of a third party or an annuity contract).
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Execution of a debt instrument by the payer.
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The use of the payer's property.
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The payments are in lieu of payments of alimony directly to your spouse.
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The written request states that both spouses intend the payments to be treated as alimony.
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You receive the written request from your spouse before you file your return for the year you made the payments.
Example.
You must pay your former spouse $10,000 in cash each year for 10 years. Your divorce decree states that the payments will end upon your former spouse's death. You must also pay your former spouse or your former spouse's estate $20,000 in cash each year for 10 years. The death of your spouse would not terminate these payments under state law.
The $10,000 annual payments may qualify as alimony. The $20,000 annual payments that do not end upon your former spouse's death are not alimony.
Example 1.
Under your divorce decree, you must pay your former spouse $30,000 annually. The payments will stop at the end of 6 years or upon your former spouse's death, if earlier.
Your former spouse has custody of your minor children. The decree provides that if any child is still a minor at your spouse's death, you must pay $10,000 annually to a trust until the youngest child reaches the age of majority. The trust income and corpus (principal) are to be used for your children's benefit.
These facts indicate that the payments to be made after your former spouse's death are a substitute for $10,000 of the $30,000 annual payments. Of each of the $30,000 annual payments, $10,000 is not alimony.
Example 2.
Under your divorce decree, you must pay your former spouse $30,000 annually. The payments will stop at the end of 15 years or upon your former spouse's death, if earlier. The decree provides that if your former spouse dies before the end of the 15-year period, you must pay the estate the difference between $450,000 ($30,000 × 15) and the total amount paid up to that time. For example, if your spouse dies at the end of the tenth year, you must pay the estate $150,000 ($450,000 - $300,000).
These facts indicate that the lump-sum payment to be made after your former spouse's death is a substitute for the full amount of the $30,000 annual payments. None of the annual payments are alimony. The result would be the same if the payment required at death were to be discounted by an appropriate interest factor to account for the prepayment.
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On the happening of a contingency relating to your child, or
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At a time that can be clearly associated with the contingency.
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Becoming employed,
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Dying,
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Leaving the household,
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Leaving school,
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Marrying, or
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Reaching a specified age or income level.
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The payments are to be reduced not more than 6 months before or after the date the child will reach 18, 21, or local age of majority.
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The payments are to be reduced on two or more occasions that occur not more than 1 year before or after a different one of your children reaches a certain age from 18 to 24. This certain age must be the same for each child, but need not be a whole number of years.
If your alimony payments decrease or terminate during the first 3 calendar years, you may be subject to the recapture rule. If you are subject to this rule, you have to include in income in the third year part of the alimony payments you previously deducted. Your spouse can deduct in the third year part of the alimony payments he or she previously included in income.
The 3-year period starts with the first calendar year you make a payment qualifying as alimony under a decree of divorce or separate maintenance or a written separation agreement. Do not include any time in which payments were being made under temporary support orders. The second and third years are the next 2 calendar years, whether or not payments are made during those years.
The reasons for a reduction or termination of alimony payments that can require a recapture include:
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A change in your divorce or separation instrument,
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A failure to make timely payments,
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A reduction in your ability to provide support, or
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A reduction in your spouse's support needs.
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Payments made under a temporary support order.
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Payments required over a period of at least 3 calendar years that vary because they are a fixed part of your income from a business or property, or from compensation for employment or self-employment.
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Payments that decrease because of the death of either spouse or the remarriage of the spouse receiving the payments before the end of the third year.
Example.
You pay your former spouse $50,000 alimony the first year, $39,000 the second year, and $28,000 the third year. You complete Worksheet 1 as illustrated (see next page). In the third year, you report $1,500 as income on Form 1040, line 11, and your former spouse reports $1,500 as a deduction on Form 1040, line 31a.
Note.Do not enter less than -0- on any line. | |||||||
1. | Alimony paid in 2nd year | 1. | |||||
2. | Alimony paid in 3rd year | 2. | |||||
3. | Floor | 3. | $15,000 | ||||
4. | Add lines 2 and 3 | 4. | |||||
5. | Subtract line 4 from line 1 | 5. | |||||
6. | Alimony paid in 1st year | 6. | |||||
7. |
Adjusted alimony paid in 2nd year (line 1 less line 5) |
7. | |||||
8. | Alimony paid in 3rd year | 8. | |||||
9. | Add lines 7 and 8 | 9. | |||||
10. | Divide line 9 by 2 | 10. | |||||
11. | Floor | 11. | $15,000 | ||||
12. | Add lines 10 and 11 | 12. | |||||
13. | Subtract line 12 from line 6 | 13. | |||||
14. | Recaptured alimony. Add lines 5 and 13 | *14. |
* If you deducted alimony paid, report this amount as income
on Form 1040, line 11.
If you reported alimony received, deduct this amount on Form 1040, line 31a. |
|
Worksheet 1.Recapture of Alimony—Illustrated |
Note.Do not enter less than -0- on any line. | |||||||
1. | Alimony paid in 2nd year | 1. | $39,000 | ||||
2. | Alimony paid in 3rd year | 2. | 28,000 | ||||
3. | Floor | 3. | $15,000 | ||||
4. | Add lines 2 and 3 | 4. | 43,000 | ||||
5. | Subtract line 4 from line 1 | 5. | -0- | ||||
6. | Alimony paid in 1st year | 6. | 50,000 | ||||
7. |
Adjusted alimony paid in 2nd year (line 1 less line 5) |
7. | 39,000 | ||||
8. | Alimony paid in 3rd year | 8. | 28,000 | ||||
9. | Add lines 7 and 8 | 9. | 67,000 | ||||
10. | Divide line 9 by 2 | 10. | 33,500 | ||||
11. | Floor | 11. | $15,000 | ||||
12. | Add lines 10 and 11 | 12. | 48,500 | ||||
13. | Subtract line 12 from line 6 | 13. | 1,500 | ||||
14. | Recaptured alimony. Add lines 5 and 13 | *14. | 1,500 |
* If you deducted alimony paid, report this amount as income
on Form 1040, line 11.
If you reported alimony received, deduct this amount on Form 1040, line 31a. |
|
Information on pre-1985 instruments was included in this publication through 2004. If you need the 2004 revision, please go to the IRS website at www.irs.gov.
A qualified domestic relations order (QDRO) is a judgment, decree, or court order (including an approved property settlement agreement) issued under a state's domestic relations law that:
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Recognizes someone other than a participant as having a right to receive benefits from a qualified retirement plan (such as most pension and profit-sharing plans) or a tax-sheltered annuity,
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Relates to payment of child support, alimony, or marital property rights to a spouse, former spouse, child, or other dependent of the participant, and
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Specifies certain information, including the amount or portion of the participant's benefits to be paid to the participant's spouse, former spouse, child, or other dependent.
The following discussions explain some of the effects of divorce or separation on traditional individual retirement arrangements (IRAs). Traditional IRAs are IRAs other than Roth or SIMPLE IRAs.
Generally, there is no recognized gain or loss on the transfer of property between spouses, or between former spouses if the transfer is because of a divorce. You may, however, have to report the transaction on a gift tax return. See Gift Tax on Property Settlements, later. If you sell property that you own jointly to split the proceeds as part of your property settlement, see Sale of Jointly-Owned Property, later.
Generally, no gain or loss is recognized on a transfer of property from you to (or in trust for the benefit of):
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Your spouse, or
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Your former spouse, but only if the transfer is incident to your divorce.
This rule applies even if the transfer was in exchange for cash, the release of marital rights, the assumption of liabilities, or other consideration.
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Your spouse or former spouse is a nonresident alien.
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Certain transfers in trust, discussed later.
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Certain stock redemptions under a divorce or separation instrument, or a valid written agreement that are taxable under applicable tax law, as discussed in section 1.1041-2 of the regulations.
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Occurs within one year after the date your marriage ends, or
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Is related to the ending of your marriage.
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The transfer is made under your original or modified divorce or separation instrument.
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The transfer occurs within 6 years after the date your marriage ends.
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A transfer of the property from you to your spouse or former spouse.
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An immediate transfer of the property from your spouse or former spouse to the third party.
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Required by your divorce or separation instrument.
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Requested in writing by your spouse or former spouse.
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Consented to in writing by your spouse or former spouse. The consent must state that both you and your spouse or former spouse intend the transfer to be treated as a transfer from you to your spouse or former spouse subject to the rules of section 1041 of the Internal Revenue Code. You must receive the consent before filing your tax return for the year you transfer the property.
Example.
You own property with a fair market value of $12,000 and an adjusted basis of $1,000. The trust did not assume any liabilities. The property is subject to a $5,000 liability. Your recognized gain on the transfer of the property in trust for the benefit of your spouse is $4,000 ($5,000 - $1,000).
Example.
Karen and Don owned their home jointly. Karen transferred her interest in the home to Don as part of their property settlement when they divorced last year. Don's basis in the interest received from Karen is her adjusted basis in the home. His total basis in the home is their joint adjusted basis.
Table 6. Property Transferred Pursuant to Divorce
The tax treatment of items of property transferred from you to your spouse or former spouse pursuant to your divorce is shown below.
IF you transfer ... | THEN you ... | AND your spouse or former spouse ... | FOR more information, see ... |
income-producing property (such as an interest in a business, rental property, stocks, or bonds) | include on your tax return any profit or loss, rental income or loss, dividends, or interest generated or derived from the property during the year until the property is transferred | reports any income or loss generated or derived after the property is transferred. | Publication 550, Investment Income and Expenses. (See Ownership transferred under U. S. Savings Bonds in chapter 1.) |
interest in a passive activity with unused passive activity losses | cannot deduct your accumulated unused passive activity losses allocable to the interest | increases the adjusted basis of the transferred interest by the amount of the unused losses. | Publication 925, Passive Activity and At-Risk Rules. |
investment credit property with recapture potential | do not have to recapture any part of the credit | may have to recapture part of the credit if he or she disposes of the property or changes its use before the end of the recapture period. | Form 4255, Recapture of Investment Credit. |
interests in nonstatutory stock options and nonqualified deferred compensation | do not include any amount in gross income upon the transfer | includes an amount in gross income when he or she exercises the stock options or when the deferred compensation is paid or made available to him or her. |
Example.
Larry and Gina owned their home jointly before their divorce in 1978. That year, Gina received Larry's interest in the home in settlement of her marital support rights. Gina's basis in the interest received from Larry is the part of the home's fair market value proportionate to that interest. Her total basis in the home is that part of the fair market value plus her adjusted basis in her own interest.
The federal gift tax does not apply to most transfers of property between spouses, or between former spouses because of divorce. The transfers usually qualify for one or more of the exceptions explained in this discussion. However, if your transfer of property does not qualify for an exception, or qualifies only in part, you must report it on a gift tax return. See Gift Tax Return, later.
For more information about the federal gift tax, see Publication 950, Introduction to Estate and Gift Taxes, and Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, and its instructions.
Your transfer of property to your spouse or former spouse is not subject to gift tax if it meets any of the following exceptions.
-
It is made in settlement of marital support rights.
-
It qualifies for the marital deduction.
-
It is made under a divorce decree.
-
It is made under a written agreement, and you are divorced within a specified period.
-
It qualifies for the annual exclusion.
-
Transfers of certain terminable interests, or
-
Transfers to your spouse if your spouse is not a U.S. citizen.
Report a transfer of property subject to gift tax on Form 709. Generally, Form 709 is due April 15 following the year of the transfer.
If you sell property that you and your spouse own jointly, you must report your share of the recognized gain or loss on your income tax return for the year of the sale. Your share of the gain or loss is determined by your state law governing ownership of property. For information on reporting gain or loss, see Publication 544.
You cannot deduct legal fees and court costs for getting a divorce. But you may be able to deduct legal fees paid for tax advice in connection with a divorce and legal fees to get alimony. In addition, you may be able to deduct fees you pay to appraisers, actuaries, and accountants for services in determining your correct tax or in helping to get alimony.
You can claim deductible fees only if you itemize deductions on Schedule A (Form 1040). Claim them as miscellaneous itemized deductions subject to the 2%-of-adjusted-gross-income limit. For more information, see Publication 529, Miscellaneous Deductions.
Example 1.
The lawyer handling your divorce consults another law firm, which handles only tax matters, to get information on how the divorce will affect your taxes. You can deduct the part of the fee paid over to the second firm and separately stated on your bill, subject to the 2% limit.
Example 2.
The lawyer handling your divorce uses the firm's tax department for tax matters related to your divorce. Your statement from the firm shows the part of the total fee for tax matters. This is based on the time required, the difficulty of the tax questions, and the amount of tax involved. You can deduct this part of your bill, subject to the 2% limit.
Example 3.
The lawyer handling your divorce also works on the tax matters. The fee for tax advice and the fee for other services are shown on the lawyer's statement. They are based on the time spent on each service and the fees charged locally for similar services. You can deduct the fee charged for tax advice, subject to the 2% limit.
When you become divorced or separated, you will usually have to file a new Form W-4, Employee's Withholding Allowance Certificate, with your employer to claim your proper withholding allowances. If you receive alimony, you may have to make estimated tax payments.
For more information, see Publication 505, Tax Withholding and Estimated Tax.
If you are married and your domicile (permanent legal home) is in a community property state, special rules determine your income. Some of these rules are explained in the following discussions. For more information, see Publication 555.
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Arizona,
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California,
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Idaho,
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Louisiana,
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Nevada,
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New Mexico,
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Texas,
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Washington, and
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Wisconsin.
If your domicile is in a community property state during any part of your tax year, you may have community income. Your state law determines whether your income is separate or community income. If you and your spouse file separate returns, you must report half of any income described by state law as community income and all of your separate income, and your spouse must report the other half of any community income plus all of his or her separate income. Each of you can claim credit for half the income tax withheld from community income.
The following discussions are situations where special rules apply to community property.
-
You treat the item as if only you are entitled to the income, and
-
You do not notify your spouse of the nature and amount of the income by the due date for filing the return (including extensions).
-
You did not file a joint return for the tax year.
-
You did not include an item of community income in gross income on your separate return.
-
The item of community income you did not include is one of the following.
-
Wages, salaries, and other compensation your spouse (or former spouse) received for services he or she performed as an employee.
-
Income your spouse (or former spouse) derived from a trade or business he or she operated as a sole proprietor.
-
Your spouse's (or former spouse's) distributive share of partnership income.
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Income from your spouse's (or former spouse's) separate property (other than income described in (a), (b), or (c)). Use the appropriate community property law to determine what is separate property.
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Any other income that belongs to your spouse (or former spouse) under community property law.
-
-
You establish that you did not know of, and had no reason to know of, that community income.
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Under all facts and circumstances, it would not be fair to include the item of community income in your gross income.
-
You and your spouse lived apart all year.
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You and your spouse did not file a joint return for a tax year beginning or ending in the calendar year.
-
You and/or your spouse had earned income for the calendar year that is community income.
-
You and your spouse have not transferred, directly or indirectly, any of the earned income in (3) between yourselves before the end of the year. Do not take into account transfers satisfying child support obligations or transfers of very small amounts or value.
If all these conditions exist, you and your spouse must report your community income as explained in the following discussions. See also Certain community income not treated as community income by one spouse, earlier.
Example.
George and Sharon were married throughout the year but did not live together at any time during the year. Both domiciles were in a community property state. They did not file a joint return or transfer any of their earned income between themselves. During the year their incomes were as follows:
George | Sharon | |||
Wages | $20,000 | $22,000 | ||
Consulting business | 5,000 | |||
Partnership | 10,000 | |||
Dividends from separate property | 1,000 | 2,000 | ||
Interest from community property | 500 | 500 | ||
Totals | $26,500 | $34,500 | ||
Under the community property law of their state, all the income is considered community income. (Some states treat income from separate property as separate income—check your state law.) Sharon did not take part in George's consulting business.
Ordinarily, on their separate returns they would each report $30,500, half the total community income of $61,000 ($26,500 + $34,500). But because they meet the four conditions listed earlier under Spouses living apart all year, they must disregard community property law in reporting all their income (except the interest income) from community property. They each report on their returns only their own earnings and other income, and their share of the interest income from community property. George reports $26,500 and Sharon reports $34,500.
When the marital community ends as a result of divorce or separation, the community assets (money and property) are divided between the spouses. Each spouse is taxed on half the community income for the part of the year before the community ends. However, see Spouses living apart all year, earlier. Income received after the community ended is separate income, taxable only to the spouse to whom it belongs.
An absolute decree of divorce or annulment ends the marital community in all community property states. A decree of annulment, even though it holds that no valid marriage ever existed, usually does not nullify community property rights arising during the “marriage.” However, you should check your state law for exceptions.
A decree of legal separation or of separate maintenance may or may not end the marital community. The court issuing the decree may terminate the marital community and divide the property between the spouses.
A separation agreement may divide the community property between you and your spouse. It may provide that this property, along with future earnings and property acquired, will be separate property. This agreement may end the community.
In some states, the marital community ends when the spouses permanently separate, even if there is no formal agreement. Check your state law.
Payments that may otherwise qualify as alimony are not deductible by the payer if they are the recipient spouse's part of community income. They are deductible by the payer as alimony and taxable to the recipient spouse only to the extent they are more than that spouse's part of community income.
Example.
You live in a community property state. You are separated but the special rules explained earlier under Spouses living apart all year do not apply. Under a written agreement, you pay your spouse $12,000 of your $20,000 total yearly community income. Your spouse receives no other community income. Under your state law, earnings of a spouse living separately and apart from the other spouse continue as community property.
On your separate returns, each of you must report $10,000 of the total community income. In addition, your spouse must report $2,000 as alimony received. You can deduct $2,000 as alimony paid.
You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. By selecting the method that is best for you, you will have quick and easy access to tax help.
www.improveirs.org.
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E-file your return. Find out about commercial tax preparation and e-file services available free to eligible taxpayers.
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Check the status of your 2007 refund. Click on Where's My Refund. Wait at least 6 weeks from the date you filed your return (3 weeks if you filed electronically). Have your 2007 tax return available because you will need to know your social security number, your filing status, and the exact whole dollar amount of your refund.
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Download forms, instructions, and publications.
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Order IRS products online.
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Research your tax questions online.
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Search publications online by topic or keyword.
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View Internal Revenue Bulletins (IRBs) published in the last few years.
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Figure your withholding allowances using the withholding calculator online at www.irs.gov/individuals.
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Determine if Form 6251 must be filed using our Alternative Minimum Tax (AMT) Assistant.
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Sign up to receive local and national tax news by email.
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Get information on starting and operating a small business.
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Ordering forms, instructions, and publications. Call 1-800-829-3676 to order current-year forms, instructions, and publications, and prior-year forms and instructions. You should receive your order within 10 days.
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Asking tax questions. Call the IRS with your tax questions at 1-800-829-1040.
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Solving problems. You can get face-to-face help solving tax problems every business day in IRS Taxpayer Assistance Centers. An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. Call your local Taxpayer Assistance Center for an appointment. To find the number, go to www.irs.gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service.
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TTY/TDD equipment. If you have access to TTY/TDD equipment, call 1-800-829-4059 to ask tax questions or to order forms and publications.
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TeleTax topics. Call 1-800-829-4477 to listen to pre-recorded messages covering various tax topics.
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Refund information. To check the status of your 2007 refund, call 1-800-829-4477 and press 1 for automated refund information or call 1-800-829-1954. Be sure to wait at least 6 weeks from the date you filed your return (3 weeks if you filed electronically). Have your 2007 tax return available because you will need to know your social security number, your filing status, and the exact whole dollar amount of your refund.
Evaluating the quality of our telephone services. To ensure IRS representatives give accurate, courteous, and professional answers, we
use several methods to evaluate the quality of our telephone services. One method is for a second IRS representative to listen
in on or record random
telephone calls. Another is to ask some callers to complete a short survey at the end of the call.
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Products. You can walk in to many post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Some IRS offices, libraries, grocery stores, copy centers, city and county government offices, credit unions, and office supply stores have a collection of products available to print from a CD or photocopy from reproducible proofs. Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes.
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Services. You can walk in to your local Taxpayer Assistance Center every business day for personal, face-to-face tax help. An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you're more comfortable talking with someone in person, visit your local Taxpayer Assistance Center where you can spread out your records and talk with an IRS representative face-to-face. No appointment is necessary, but if you prefer, you can call your local Center and leave a message requesting an appointment to resolve a tax account issue. A representative will call you back within 2 business days to schedule an in-person appointment at your convenience. To find the number, go to www.irs.gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service.
National Distribution Center
P.O. Box 8903
Bloomington, IL 61702-8903
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Current-year forms, instructions, and publications.
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Prior-year forms, instructions, and publications.
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Bonus: Historical Tax Products DVD - Ships with the final release.
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Tax Map: an electronic research tool and finding aid.
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Tax law frequently asked questions.
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Tax Topics from the IRS telephone response system.
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Fill-in, print, and save features for most tax forms.
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Internal Revenue Bulletins.
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Toll-free and email technical support.
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The CD which is released twice during the year.
- The first release will ship the beginning of January 2008.
- The final release will ship the beginning of March 2008.
Purchase the CD/DVD from National Technical Information Service (NTIS) at www.irs.gov/cdorders for $35 (no handling fee) or call 1-877-CDFORMS (1-877-233-6767) toll free to buy the CD/DVD for $35 (plus a $5 handling fee). Price is subject to change.
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Helpful information, such as how to prepare a business plan, find financing for your business, and much more.
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All the business tax forms, instructions, and publications needed to successfully manage a business.
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Tax law changes for 2007.
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Tax Map: an electronic research tool and finding aid.
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Web links to various government agencies, business associations, and IRS organizations.
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“Rate the Product” survey—your opportunity to suggest changes for future editions.
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A site map of the CD to help you navigate the pages of the CD with ease.
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An interactive “Teens in Biz” module that gives practical tips for teens about starting their own business, creating a business plan, and filing taxes.
An updated version of this CD is available each year in early April. You can get a free copy by calling 1-800-829-3676 or by visiting www.irs.gov/smallbiz.
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