Unfortunately, after a divorce decree has been finalized, many single parents will find that they are paying more in income taxes now than when they were married. This is usually because rather than being able to file as married filing jointly, you are now required to file as single or as head of household. Both of these filing status rates are higher than when filing as married filing jointly. Thus the newly single parent finds him or herself paying more in taxes.
As a single parent, you now carry all of the responsibilities you used to share with your spouse. All facets of financial planning now rest on your shoulders, including insurance, investments, income tax, retirement and estate planning. As your income tax is affected by your new status, so is your estate planning. You can no longer take advantage of the unlimited marital deduction when it comes to passing on your estate and will need to leave your assets to your children and/or your favorite charities, etc. Insurance, investments and retirement issues need to be addressed and are probably of even more importance to you now as you alone are the sole provider for yourself and possibly your children.
Choosing a Filing Status
Will it save you more money to itemize rather than to take the standard deduction? The only real way to find out is to add up all your itemized expenses and compare that number with the standard deduction you are allotted for your filing status. If your deductions exceed the amount of your standard deduction then you should itemize. In order to itemize, you should save all of your receipts and records for anything that may be deductible.
Keep in mind that when it comes to claiming exemptions for children of divorced parents, generally the parent who has physical custody of that child for the greater part of the year is the one who is entitled to take the exemption for that child on their tax return. Exceptions to this rule are when a custodial parent signs a statement waiving the exemption for one or more years or a noncustodial parent contributes at least $600 towards the child's support for the year and there is an existing valid pre-1985 divorce decree that states that this parent is entitled to the exemption. In addition, child support payments are neither deductible by the payer nor taxable to the recipient. Alimony payments, however, are taxable to the recipient as well as deductible to the payer.