Ask the Expert: Financial Planner
PALATNIK, CFP, CDFA
Please send your questions to
Carl Palatnik.Because of the large volume of mail and the sensitivity or specific nature of some issues, it is impossible to post answers to all of your questions in this column. As time permits, and if you so indicate, I will try to send a few personalized responses. DivorceInteractive.com has a strict
A: The two of you are not alone. Which parent gets to claim the exemptions for the children is one of the more contentious issues that come up in a divorce. Iíve seen people spend more time and more money in legal fees on this issue than on much larger ones. Iíve even seen legal costs go so high that they far exceed any benefits. Itís clear from your question that this is
not just a financial issue but also an emotional one. Remember, there are three parties at the negotiating table - you, your wife and Uncle Sam. If the two of you canít get down to business, the party most likely to benefit will be Uncle Sam. From a strictly financial perspective, the less Uncle Sam gets the more there will be to go around. So, the best strategy is the one that results in the
lowest total taxes. You and your wife could work out a sharing arrangement for the savings in taxes so you both benefit from cooperating on this issue. Figuring out tax savings is not simple and may require professional advice, but itís well worth it. Under current law, the custodial parent gets to claim the exemptions but can waive the right by filing Form 8332, Release of Claim to Exemption for Child of Divorce or Separated Parents. The value of any exemptions is dependent, in part, upon your respective tax brackets. However, it should not automatically be given to the one in the higher tax bracket because of potential itemized deduction and personal exemption limitations. Other factors include the respective values of the Child and Education Tax Credits, the Savings Bond Interest Exclusion for college tuition and the Student Loan Interest Deduction, which can be claimed for dependent children only, but are also subject to income
limitations. Decisions can be made annually, so donít worry that either of you might be giving something away permanently by trying to work things out in this way.
Q: My wife and I have agreed on most things but
seem to be stuck on who should claim the children on our tax returns. I feel that Iím already paying her a lot of money in child support and that enough is enough. She says that the children are staying with her and that she is the one who will be taking care of them most of the time. Also, because she is making less money than I am, she needs all the help she can get. Yet, Iím the one providing most of the financial support, Iím the one paying the most in taxes and they are my children too! What should we do?
DivorceInteractive.com tries to provide
quality information, but cannot guarantee the accuracy, completeness or adequacy
of the information, opinions or other content posted on the site. It is not
intended as a substitute for and should not be relied upon as legal, financial,
accounting, tax, medical or other professional advice. It should not be
construed as establishing a professional-client or professional-patient
relationship. The applicability of legal principles is subject to amendment by
the legislature, interpretation by the courts and different application by
different judges and may differ substantially in individual situations or
different states. Before acting on what you have read, it is important to obtain
appropriate professional advice about your particular situation and facts.
Access to and use of DivorceInteractive.com is subject to additional
Terms and Conditions. DivorceInteractive.com
is a secure site and respects your Privacy.
Advertise With Us |
Professional & Resource Directory
Divorce News | Glossary | Divorce Discussion Forums
DivorceInteractive.com All Rights Reserved.