It's official. Tiger and Elin Woods are divorced.
I'm sure Tiger's and Elin's financial and tax advisers have walked them through all this, but for the rest of us, here's a quick refresher on taxes and divorce.
Consider the kids: Tiger and Elin will, according to news reports, share parenting of their two children. That's a common arrangement. But you also have to decide who will get the children's tax exemptions. It generally goes to the custodial parent, that is the one with whom the kids spend most of the year. That's typically mom, but couples can decide to split the exemptions.
That dependency issue will also affect the various child-related tax breaks, such as the child tax credit, the child and dependent care credit and various education tax breaks. Check them out to make sure who can claim these at filing time.
Filing status change: Since Tiger and Elin are now divorced, they will be filing separate returns for 2010. The tax law says you choose your filing status based on your marital status at the end of the year. In most divorce cases, that means dad is now a single filer and mom, who has the kids, files as head of household, which provides a greater standard deduction amount.
Housing concerns: When a couple splits, they often have to deal with disposal of the house they shared. Most times, the ex-wife wants to keep it so she and kids can maintain as much of their old routine as possible. But if she gets the house, she needs to be aware that when it comes time to sell, she won't be able to shelter as much from the tax collector. A single seller only gets a $250,000 profit exemption from capital gains. So couples might want to sell the house before the divorce is final so they can protect up to $500,000 in gains from the IRS.
Support payments and taxes: Alimony usually is taxable income to the ex who receives it. But the spouse making the payment gets to deduct them. And child support is neither taxable income nor a deductible expense.
Here's wishing the former Mr. and Mrs. Woods the best on their new separate journeys. And here's hoping you and your spouse have a long and happy marriage.
But just in case, don't forget about possible taxes connected with your break-up.